The year 2023 ended on a strong note with markets at record highs supported by strong FPI inflows. The Foreign Portfolio Investors (FPI) net inflows that had turned negative during September and October 2023, however turned positive in November and December. The US Federal Reserve indicating no more interest rate hikes and market expectations on interest rate cuts by March 2024 led to a decline in the US Bond Yields. The declining bond yields and softer Dollar Index have led to the FPI turning buyers in the emerging markets. With strong growth outlook, India is seeing favor from FPIs. The FPI turning buyers worth ₹66135 crore in Indian equity markets during December 2023 meant that FPI were buyers worth ₹1.7 trillion ( ₹171107 crore) in the equity market during the year 2023 as per NSDL data.
“Since 2024 is expected to witness further declines in U.S. interest rates, FPIs are likely to increase their purchases in 2024 too, particularly in the early months of 2024 in the run up to the General elections”, as per Dr VijayaKumar, Chief Investment Strategist at Geojit Financial Services.
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2023 has witnessed big investment by FPIs thanks to the sharp uptick in flows in December, said Vijayakumar. FPI inflows which were negative in the previous 3 months have sharply turned positive in December. The steady decline in U.S. bond yields have caused this sudden change in the strategy of FPIs said Vijayakumar.
n December, FPIs were big buyers in financial services which explains the resilience of this segment in December. FPIs also bought in sectors like autos, capital goods and telecom.
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Deepak Jasani – Head of Retail Research, HDFC Securities, also expects FPI flows to remain positive in the near term. The expectations of rate cuts in the US as per Jassani is likely to keep FPI flows positive. The factors that can influence FPI inflows however include lower than expected Q3 results. extended disruption in the Red Sea leading to spike in inflation or a large stimulus package in China. A big China stimulus package can lead to some diversion of FPI flows to China.
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Published: 01 Jan 2024, 04:54 PM IST