Mumbai: Foreign portfolio investors (FPIs) bought Indian shares 11,631 crore in April, the highest in four months, with sectors such as financial services, automobile, IT and capital goods attracting huge inflows in the first half of the month.
FPI buying helped the 12-stock Bank Nifty index outperform the broader Nifty 50 in April. While Nifty is 4.55% away from its record high of 18,887.6 points, Bank Nifty is only 2.2% away from its record high of 44,151.8.
April purchases were the highest for FPIs since their 36,239 crore inflows last November, which took the Nifty to a record high of 18,887.6 on December 1. Against this, domestic institutional investors (DIIs), including mutual funds, only invested 2,217 crore in April.
After buying shares of value 11,119 crore in December, FPIs became net sellers in January and February, which saw the Nifty sliding to a consecutive low of 16,828 on March 20. An 11% fall from the record high till March 20 prompted FPIs to buy once again, helping the Nifty. Closed at 18,065 on April 28 with a recovery of 7%.
During the first half of April, the bulk of FPI inflows were directed to financial services (banks and non-bank lenders), which 4410 crore inflow, followed by auto and auto components ( 1,259 crore), IT ( 1,002 crore) and capital goods ( 408 crore), shows data from the National Securities Depository Ltd.
Analysts expect FPI buying to lift the index further but investors were advised to remain selective as the fear gauge, as reflected by it, is nearing its 52-week low.
Chandan Taparia, Vice President, Motilal said, “FPI buying in BFSI, auto and capital goods has propelled the rally since the second fortnight of March and it looks like the market may pick up further, but investors should exercise caution.” ” Oswal Financial Services.
India Vix, which gauges market sentiment, has fallen 20% to 10.95 from 13.63 a month ago, close to 52-week low of 10.17.
SK Joshi, executive director, Khambatta Securities, said, “The lower reading indicates complacency, which could be taking investors down the wrong path.”
Taparia said another reason for rally in Nifty and Bank Nifty is short covering by FPIs in index futures. “Their tall-short ratio has dropped to about 55% from the 90% seen weeks ago,” Taparia said.
Other analysts say a strong rupee has attracted FPIs.
VK Vijayakumar, chief strategist, Geojit Financial Services, said, “An important macro factor that has tilted the FPI outlook is the appreciation in the rupee.” The rupee, which had touched a low of 82.94 against the dollar in late February, has now recovered. 81.75. India’s current account deficit is narrowing and if this trend continues, the rupee may strengthen further. FPI is likely to bring more inflows into India in this context. FPIs are buying in financial services and auto and auto components,” he said.
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