New Delhi: After becoming net buyers last month, foreign investors continued their positive stance on Indian equities and infused over Rs 14,000 crore in the first week of August amid softening dollar index. This was much higher than the net investments of about Rs 5,000 crore made by foreign portfolio investors (FPIs) throughout July, data from the depositories showed.
FPIs had turned buyers in July after nine consecutive months of huge net outflows, which started in October last year. Between October 2021 and June 2022, he sold a whopping Rs 2.46 lakh crore in the Indian equity markets. (Also read: Gold price today, August 7: Gold prices fall, yellow metal is at Rs 51,870)
Hitesh Jain, Lead Analyst, Institutional Equities, Yes Securities, said FPI inflows are expected to be positive during August as the worst-case scenario for rupee is over and crude oil prices are confined in a range. (Also Read: Anand Mahindra Compares ‘Out Of Stock’ Taj Mahal To White House Lego Set, Says ‘Brand Value’)
“Furthermore, the earnings story remains strong, with strong revenue growth offsetting the contraction in profit margins,” he said.
According to depository data, FPIs netted Rs 14,175 crore in Indian equities in the first week of August.
Change in FPI strategy has strengthened the recent market rally.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The fall in the dollar index from last month’s high of 109 to below 106 is now the main reason for FPI inflows. This trend is likely to continue.”
In addition, Fed Chair Jerome Powell’s remarks that the US is not currently in a recession have helped improve sentiment and risk appetite globally, said Himanshu Srivastava, Associate Director- Manager Research, Morningstar India.
He added that the recent recovery in the Indian equity markets has also provided a good buying opportunity, and FPIs are taking advantage of this by choosing high quality companies.
FPIs have become buyers in sectors such as capital goods, FMCG, construction and power.
In addition, FPIs infused a net amount of Rs 230 crore into the debt market during the month under review.
According to Srivastava, the flows are largely driven by short-term trends.
In addition, China and Taiwan are another watchdog point of equation and rising tensions between the two could disturb and exacerbate geopolitical risks in the region. This could adversely affect the flow, he said.
At the same time, there is also concern about America falling into the grip of recession. He said any aggressive rate hike by the US Federal Reserve or its expectation could further increase capital outflows from emerging markets like India.