FPIs continue buying streak in March, pump ₹40,710 crore in Indian equities; Will the inflows continue?

FPIs have bought ₹40, 710 crore worth of Indian equities and the total inflow stands at ₹50,471 crore as of March 15, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data.

“The trend of rising foreign portfolio investment in India witnessed in the first week of March continued in the second week, too. FPIs were big sellers in January and modest buyers in February,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

But, this figure includes some bulk deals executed through the stock exchanges and, therefore, is not a true indicator of FPI activity, according to the analyst. However, the rising trend of FPI investment continues, he added.

Will the inflows sustain in near-term?

On the macro-economic factors, forthcoming general elections and large companies reflecting profound earnings along with decent valuations would stimulate India to be on the top spot amongst the global emerging markets to look out for atleast next 2-3 years, said market analysts.

However, Dr. V K Vijayakumar noted that an important feature of FPI investment for many months now has been its erratic nature. FPIs have been changing their strategy in response to the changes in the bond yields in the US.

The benchmark US Treasury yield rose to its highest level in three weeks on Friday, as a mixed batch of data signaled a still-resilient economy, boosting expectations for fewer interest rate cuts by the US Federal Reserve this year.

Benchmark 10-year notes’ yields were last up 1.4 basis points (bps) at 4.310 per cent, their highest since Feb. 22. They are on track to post their largest weekly gain since mid-October at 21.8 bps. ‘’Now that US bond yields have again spiked up in response to stubborn inflation, FPIs may again turn sellers in some of the days, going forward,” said Dr. V K Vijayakumar.

‘’An important trend in the market in March is the weakness in the mid and smallcaps and the resilience in largecaps. This also has persuaded FPIs to reduce selling in largecaps and even buying in limited quantities in sectors like banking, telecom and automobiles,” added the analyst.

FPI activity in Indian markets

FPIs outflow initially declined in February until they were net buyers by the end of the month, despite high US bond yields. The inflow into Indian equities stood at ₹1,539 crore and the debt market investment rose to ₹22,419 crore in February on top of the ₹19,836 crore bought in January. 

The inclusion of government bonds to JPMorgan and Bloomberg debt indices especially triggered foreign fund inflows into debt markets. FPIs turned massive sellers in January 2024 snapping their buying streak as investments saw a sharp uptick in December 2023 after they reversed their three-month selling streak in November 2023.

However, inflow intensified in December on strong global cues after the US Federal Reserve signalled the end of its tightening cycle and raised expectations of a rate cut in March 2024. This led to a crash in US bond yields and triggered foreign fund inflows into emerging markets like India.

For the entire calendar year 2023, FPIs bought ₹1.71 lakh crore in Indian equities and the total inflow stands at ₹2.37 lakh crore taking into account debt, hybrid, debt-VRR, and equities, according to NSDL data. FPIs’ net investment in Indian debt market stands at ₹68,663 crore during 2023.

Overall, only four months in 2023–January, February, September, and October- saw net FPI outflows from Indian equities. May, June, and July each recorded FPI inflows above ₹43,800 crore.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!

Published: 16 Mar 2024, 06:13 PM IST