FPIs have bought ₹26,505 crore worth of Indian equities and the total inflow stands at ₹30,852 crore as of December 8, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. The investment in cash market stands at ₹10,874 crore.
Analysts noted that the actual inflows by FPIs was caused by MSCI EM Index rebalancing, among others. ‘’As per NSDL data, the total inflows into India including investment through the primary market, through 8th December stands at a whopping ₹26,605 crore,” said Dr. V K Vijayakumar.
FPI activity in Indian markets
FPIs were net sellers in August, September and October on a sharp spike in US bond yields amid ongoing geopolitical tensions in the Middle East. FPIs were net buyers till November 15, but reversed the selling trend and invested on November 15 and 16. During August, September October and till November 15, FPIs cumulatively sold stocks for ₹83,422 crore through the exchanges.
FPI inflows into Indian equities during November stood at ₹9,001 crore, compared to over ₹39,000 crore worth of shares sold in September and October together, according to NSDL data. Taking into account debt, hybrid, debt-VRR, and equities, FPI inflows were at ₹24,546 crore during the month.
“FPIs made a major comeback to India in December. Even though FPIs made an investment of ₹9,000 crore in India in November, they were sellers for ₹368 crores in the cash market. This has changed in December with big time buying in the cash market,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
What led to the trend reversal by FPIs from November?
The Indian economy grew 7.6 per cent during the July-September quarter for fiscal 2023-24 (Q2FY24), remaining the fastest-growing major economy in the world, according to the gross domestic product (GDP) data released by the statistics ministry.
Also, the BJP winning by a majority of votes in the the hindi heartland – Madhya Pradesh, Rajasthan, and Chhattisgarh in the state assembly elections on December 13, instilled a sense of political stability ahead of General Elections 2024. Market analysts say that a stable political environment could boost investor confidence and drive the market higher.
Also Read: After RBI MPC verdict, US Fed to unveil policy decision next week: Here’s what experts predict
‘’The indication of political stability after the 2024 General elections, strong growth momentum in the Indian economy, inflation cooling off, steady decline in US bond yields and the correction in Brent crude have turned the situation in India’s favour,” said Dr. V K Vijayakumar.
After the latest US Federal Reserve policy outcome on November 1, the US bond yields have sharply corrected to 4 per cent-levels on Fed Chair Jerome Powell’s dovish commentary. The next US Fed policy decision will be unveiled on December 13.
Powell said that “despite elevated inflation, inflationary expectations remain well anchored.” The market has interpreted this statement as the end of the rate hiking cycle. This is why US bond yields corrected sharply.
FPI inflow likely to continue; Here’s why
Markets now believe that the Fed is done with rate hikes and will slowly start discounting rate cuts in 2024. If the declining trend in US inflation persists the Fed may cut rates by mid 2024. This can facilitate FPI inflows into emerging markets (EMs) like India, according to analysts.
Going forward, FPI inflows are likely to continue. FPIs have turned buyers in leading banks where they have been sellers. Large caps in segments like IT, telecom, automobiles and capital goods are also witnessing buying. This trend is likely to continue,” added Geojit’s Dr. V K Vijayakumar.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 09 Dec 2023, 05:53 PM IST