FPIs turn net sellers worth ₹8,671 crore in April after 2 months of buying; will the trend continue?

However, despite FPIs becoming sellers, Indian benchmarks delivered positive returns, even hit new peaks, in April on the back of strong domestic investor inflows, improving macro data and decent March quarter results.

Nifty rose 1.24 percent in April, extending gains for the third straight month. Before this, it rose 1.57 percent in March and 1.19 percent in February. However, the benchmark was flat but in the red in January.

Read here: After 2 months of decline, mid and smallcap indices outperformed Nifty in April

FPI data

Before turning net sellers in April, FPIs infused a massive 35,098 crore in March, while, the net inflow was at ₹1,539 crore in February. However, in the first month of the current calendar year, January, FPI investments were in the red. They sold equities worth ₹25,744 crore in January. Overall, in 2024 YTD, the FPIs have made inflows worth ₹2,222 crore.

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Debt

Meanwhile, FPIs also turned net sellers in the country’s debt market in April with outflows worth ₹10,949 crore. Before this FPIs were net buyers in this segment for 12 straight months since April 2023, taking the total investment to ₹1.2 lakh crore in the debt market in this period.

Just in 2024 YTD, FPIs invested ₹44,909 crore in the debt market with inflows of ₹13,602 crore in March, ₹22,419 crore in February and ₹19,837 crore in January. Before April, the month of March last year saw selling worth ₹2,505 crore into debt securities.

Read here: Can Bank Nifty hit 50,000 in May? Here’s what analysts say

Outlook

Going ahead, the rise in bond yields and elevated inflation may keep foreign investors away from riskier markets in favour of safer options like US treasuries. Experts also believe that FPIs have adopted a wait-and-watch approach to watch out for macroeconomic concerns like inflation and how central banks deal with it.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services

The trigger for this renewed FPI selling, in both equity and debt, is the sustained rise in US bond yields. The 10-year bond yield now stands at around 4.7 percent which is hugely attractive for foreign investors. The latest core CPI inflation in the US jumped to 3.7 percent against the expectation of 3.4 percent. This means the prospects of early rate cuts by the Fed are receding. This will keep yields high triggering more FPI outflows in both equity and debt.

The positive factor is that all FPI selling in the equity markets is getting absorbed by DIIs, HNIs and retail investors. This is the only factor that may reign in FPI selling.

Read here: Share market in April: M&M, Axis Bank among top 5 gainers as Nifty gains 1%

Ravi Singh, SVP – Retail Research, Religare Broking

We believe the FPI inflows will rise even more in the coming years. The Modi government’s third term will be one of the reasons due to its business-friendly policies and government focus on the manufacturing sector. Apart from this, there are several reasons like India has a young and vibrant population with a significant number of people who are entering the workforce every year. This increases the spending power of consumers and results in growing demands in various sectors from consumer staples and discretionary goods to retail and entertainment, making India an attractive place for investment.

Major central banks are expected to cut interest rates which will act as a catalyst. Moreover, due to slow growth in China and its geopolitical tensions, India has become a safe haven for investments in manufacturing and building supply chains.

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 making any investment decisions.

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Published: 01 May 2024, 02:46 PM IST