Expected growth in consumer spending during the festive season and better macro fundamentals than other emerging markets has led foreign investors to infuse around Rs 5,600 crore in domestic equity markets so far this month. This comes after net investments of Rs 51,200 crore in August and around Rs 5,000 crore in July, data from the depositories showed.
There is a clear trend reversal in FPI (foreign portfolio investment) inflows since July, when foreign investors became buyers. India After nine consecutive months of massive net outflows, which started in October last year. Between October 2021 and June 2022, he sold a whopping Rs 2.46 lakh crore in India’s equity markets. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said the trend of FPI inflows into India is likely to continue. However, if US bond yields continue to rise and the dollar index moves above 110, inflows could be hit.
“I think FPIs will continue to buy Indian equities irrespective of the US Fed outcome,” said Jai Prakash Gupta, founder of Dhana. According to depository data, FPIs made a net investment of Rs 5,593 crore in Indian equities during September 1-9.
“FPIs are buying into India because India has the best growth and earnings story among the world’s major economies. The pace of America, Eurozone and China is slowing down. India is the bright spot,” Vijayakumar said. Shrikant Chauhan, Head-Equity Research (Retail), Kotak Securities, said the fall in prices and fall in domestic bond yields are encouraging Indian markets.
“The fall in crude oil prices, coupled with expected rise in consumer spending in the coming festive season, better macro fundamentals than other emerging markets will certainly provide tailwinds for India,” Gupta said. Also, investment exodus from Russia finding an option in India and funds looking to diversify investments away from China are factors that have restarted FPI inflows into Indian equities, said Hitesh Jain, Lead Analyst – Institutional Equities, Yes Securities, said.
Foreign investors will be eyeing the outcome of the Federal Open Market Committee (FOMC) meeting on September 21 and the Fed may increase interest rates by 75 basis points. US inflation eased from a 40-year high in June to 8.5 per cent in July on lower petrol prices. In India, consumer price index-based retail inflation eased marginally to 6.71 per cent in July, as against 7.01 per cent in June due to a fall in food prices.
Himanshu Srivastava, Associate Director- Manager Research, Morningstar India, said the stance and outlook of FPIs towards India has started to change from mid-July, expecting that global central banks, especially the US Fed, will take a stand on rate hikes. Might go slow as inflation begins to calm down. Also, Indian stocks went through a period of correction, making them relatively attractive on valuation.
FPIs use this opportunity to select and invest in high quality companies. They are now buying shares in financial, healthcare, FMCG and telecom. According to Yes Securities Jain, FPIs are pouring money into domestic facing sectors such as banks and consumption stocks that are free from global shocks, and India’s traction is evident in terms of credit growth and consumer spending.
In addition, FPIs made a net investment of Rs 158 crore in the debt market during the month under review. Apart from India, other emerging markets including South Korea, Taiwan, Indonesia, Thailand and Philippines also saw inflows during the period under review.
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