Foreign Portfolio Investors (FPIs) channeled a net investment of Rs 57,313 crore into Indian equities within this month up to December 22, marking the most substantial monthly inflow they’ve recorded in the past year.
Foreign portfolio investors (FPIs) have infused more than Rs 57,300 crore into the Indian equity markets this month, driven by factors such as political stability, strong economic growth, and a consistent decrease in US bond yields.
As a result, the cumulative investment by FPIs in the country has exceeded Rs 1.62 lakh crore for the year.
Looking ahead, the Chief Investment Strategist at Geojit Financial Services, V K Vijayakumar, anticipates a decline in US interest rates in the coming New Year, and he predicts that FPIs are likely to ramp up their investments in 2024.
Recent data reveals that FPIs made a net investment of Rs 57,313 crore in Indian equities by December 22, marking the highest monthly inflow in a year. This is followed by a net investment of Rs 9,000 crore in October.
Driving Factors: Unpacking Positive FPI Inflows in India
The positive momentum in FPI inflows can be attributed to various factors, with political stability and optimistic sentiments prevailing in the Indian markets being primary drivers. Furthermore, the nation’s stable and robust economy, along with impressive corporate earnings and a series of Initial Public Offerings (IPOs), has enticed foreign investors to explore investment opportunities in India.
Vijayakumar highlights that the consistent decline in U.S. bond yields has played a pivotal role in influencing FPIs’ investment strategies.
Mayank Mehraa, smallcase manager and principal partner at Craving Alpha, expresses optimism about India’s market conditions, citing strong GDP growth that surpasses estimates and a thriving manufacturing sector.
Globally, the US Federal Reserve has signaled the possibility of three rate cuts in the next year, signaling the end of the rate hike cycle, which is viewed favorably for emerging markets like India.
Bhuvan Rustagi, COO and Co-Founder of Per Annum & Lendbox, underscores factors such as easing Fed tightening, declining US treasury yields, and a softer dollar. Additionally, India-specific factors, including robust economic growth, political stability, improved corporate earnings, and attractive valuations, have contributed to FPIs’ increased investments.
Shifting focus to the bond market, it attracted Rs 15,545 crore during the period under review. This followed inflows of Rs 14,860 crore in November and Rs 6,381 crore in October.
In terms of sectors, FPIs displayed significant interest in financial services and also demonstrated a keen interest in sectors such as autos, capital goods, and telecom.
As per the data, FPIs injected a net amount of Rs 57,313 crore into Indian equities this month, up to December 22, marking the most substantial monthly inflow in a year.This positive trend comes on the heels of overseas investors withdrawing Rs 39,300 crore in August and September, as indicated by data from the depositories.
The notable increase in FPI inflows into the Indian stock markets can be ascribed to various factors, with political stability and optimistic sentiments prevailing in the Indian markets. Additionally, the nation’s stable and robust economy, along with impressive corporate earnings and a series of Initial Public Offerings (IPOs), has attracted foreign investors to explore investment opportunities in India, he added.
Vijayakumar noted that the consistent decline in US bond yields has triggered this abrupt shift in FPIs’ strategies.
