The bullish sentiment for the equity market at the end of July resulted in foreign portfolio investors (FPIs) emerging as net buyers for the first time this year. FPI’s appetite for equities increased in the last week of July, as they remained net sellers in other capital market related instruments. After six consecutive months of outflows, FPIs have pumped in approx. 5,000 crore in the Indian equity market. This will be the first positive sign since the first half of the year, which was dominated by the bears. Both the Sensex and Nifty 50 benchmarks have recovered substantially as bearish fears have subsided and investors expect a calming of inflation in the coming months as signs of monetary policy tightening subside.
According to NSDL data in July FPI pumped in 4,989 crore in the equity market, while they were net sellers in the debt market 2,056 crore. FPI also removed 785 crore and 176 cr from debt – VRR and Hybrid Market,
After the above, the overall FPI investment in the Indian market was 1,971 crore in July. This includes equity, debt, debt-VRR and hybrid markets.
In June 2022, foreign investors almost 50,203 crore from Equity – Highest ever monthly outflow in 2022. FPI in the first quarter of FY23 (April to June) has removed 1,07,340 crore in Indian equities. Meanwhile, in the first six months of 2022 (January-June), the equity outflow is approx. 2,17,358 crore by FPIs.
Equity markets registered some improvement in outflows from FPIs in July due to inflows. So far, FPI outflows are around 2,12,369 crore this year.
“NSDL data as on July 29 shows FPIs have become buyers for the month,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, adding, “FPIs were buyers for 9 days in July. This reversal in FPI activity is one of the key factors driving the market rally in July.”
Further, Vijayakumar said, “Continuous fall in the dollar index above 109 around 106.20 has now slowed capital outflows from other markets into the US. Good Q1 results from financials have resulted in increased demand for these stocks.” Changes in FPI Strategy There has been short covering in financial and IT also in recent times.
In the week ended July 25-29, the Sensex rose at least 1,498 points since July 22, while the Nifty 50 gained nearly 440 points. Both Sensex and Nifty 50 have gained around 3% in the last week of July.
In this week’s trading session, the sentiment will revolve around RBI’s monetary policy results and June 2022 quarter earnings.
In their research note, Yes Bank analysts Indranil Pan, Deepti Mathew and Radhika Piplani said, as anticipated, the FOMC raised the policy rate for the second time in a row by 75 bps to 2.25- 2.50%. Fed Chair Powell did not provide any material forward guidance but indicated the way forward for the data-dependent Fed. He was guided by the fact that the current dot plot estimate of 3.25-3.50% FFR by December 2022 remains appropriate, indicating an increase of 100 bps from current levels. This is probably a sign of slowing down of rate hikes.”
“While the Fed is aware of the slowing impact on the economy, a recession is no longer something on their mind as labor markets remain strong. Money markets rejoiced at Dovish rate hikes. Dovish growth also led to a relief rally As for assets, however, the chances of a slowdown will soon subside. Even if the RBI doesn’t strictly follow the Fed, we will continue to see the RBI hike 50 bps in August,” the analysts said.
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