Foreign portfolio investors (FPIs) have continued their buying streak in Indian equities for the 12th consecutive session, purchasing $141 million worth of shares on Tuesday.
Since June 7, FPIs have cumulatively invested $3.7 billion in Indian stocks, following the reduction of uncertainty regarding policy continuity at the Center. During the same period, domestic institutional investors (DIIs) bought $1.6 billion worth of shares.
The last similar extended buying spree from foreign investors lasted 26 days through June 2, 2023, according to data available.
Investor sentiment has also been bolstered by India’s current account swinging to a surplus after ten quarters of deficits. For the quarter ending March 2024, the current account surplus stood at $5.7 billion, or 0.6% of GDP, compared to a deficit of $8.7 billion in the previous quarter.
Additionally, the rupee, which had hit a record low of 83.65, has gained 0.30% against the US dollar over the last three sessions, closing Tuesday’s session higher at 83.43. This positive movement in the currency market coincided with both the Sensex and Nifty50 gaining 1% each, reaching record highs.
Interestingly, this renewed buying interest from FPIs comes after two months of net selling. In May, overseas investors sold shares worth over $3 billion, following a sell-off of just over $1 billion in April.
The resumption of FPI buying has helped mitigate this year’s outflows, which had nearly reached $5 billion just two days after the election results. Over the past few years, FPI selling has been particularly intense, leading to the underperformance of bank stocks, especially private ones, in which FPIs have higher weightages.
In the broader emerging markets landscape, South Korea has attracted the highest inflow of $16.5 billion in 2024 so far, followed by Taiwan with an inflow of $4.7 billion.
Analyst on FPIs Inflow’s
Commenting on the FPIs inflows in Indian Markets Atul Parakh, CEO of Bigul said that the recent surge in foreign portfolio investment (FPI) in India is a significant positive signal. The $3.7 billion inflow over just 12 days indicates renewed confidence in the Indian market. This trend likely stems from India’s robust economic fundamentals, potential for growth, and relative stability compared to other emerging markets.
He also added that factors such as moderating inflation, expectations of policy rate cuts, and attractive valuations may be driving this interest. However, it’s crucial to monitor global economic conditions, geopolitical events, and domestic policy changes that could impact this momentum. While encouraging, sustained inflows will be key to determining if this represents a long-term shift in foreign investor sentiment towards India.
Commenting on the same Ravi Singh- SVP, Retail Research, Religare Broking said that Post election sell offs, we have seen a buying spree from the foreign institutions in the Indian markets. Modi government returning to power was the major reason. Now the next significant event is the Union Budget and Markets are optimistic about the favourable policies in the upcoming budget.
Singh also added that today we saw a sharp rally as the Lok sabha speaker received a clear mandate in retaining the position which further reflects the positive sentiment. Considering all these factors foreign institutions are comfortable at the current valuations hence we are seeing a huge inflow of funds in the Indian equities.
“Return of FPIs, after having tug of war in last 6 months, now FPIs have emerged as net buyers in domestic’s markets for the 10-12 straight sessions and have made a stellar comeback in Indian markets mainly on the back of strong macroeconomic fundamentals and multiple upgrades of India’s economic growth by global firms compared to other growing economics of the world,” said Prashanth Tapse, Sr VP research analyst at Mehta equities.
Tapse also added despite several challenges on the global front both FPI’s and DII’s participated in equity to push Nifty 50 hitting fresh lifetime record high of 23885. We believe and expect US FED would be softening interest rates on or before Sept 2024 getting discounted in the markets. The good news is that the short-term technical outlook for Nifty continues to be in favor of the bulls and technically nifty is headed toward 24000-24135 in the near term.
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