FPIs stay glued to Indian equities; infuse Rs 16,405 cr in Jun so far

Foreign portfolio investors (FPIs) continued to invest in Indian equities for a fourth straight month as they injected Rs 16,405 crore in June so far on the country’s strong economic rebound and positive growth outlook. FPI flows touched a nine-month high of Rs 43,838 crore in equities in May, Rs 11,631 crore in April, and Rs 7,936 crore in March, data with the depositories showed.

Before that, FPIs had pulled out over Rs 34,000 crore during January-February.

”Considering the current investment trend, it is expected that FPIs will continue to show interest in the Indian market throughout the month,” Mayank Mehraa, Smallcase manager and principal partner at financial consultancy Craving Alpha, said.

The ongoing economic recovery, positive corporate earnings, and supportive policy environment are likely to sustain the inflow of funds, he added.

However, valuation could become a concern as Indian markets continue to surge and stricter regulatory norms could also check foreign money flowing into India to some extent, Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said.

According to the data, FPIs invested a net sum of Rs 16,406 crore in Indian equities during June 1-16.

Market experts believe that India’s strong economic rebound and positive growth outlook have caught the attention of foreign investors.

The sustained investment by FPIs is a reflection of their increasing confidence in the resilience of the Indian economy and the potential earnings of the corporate sector, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Further, global consensus about stronger economic reforms and measures in the run-up to the elections 2024 are boosting FPIs confidence, Mehraa said.

In addition, the pause in interest-rate hikes by the US Federal Reserve, after more than a year of consecutive rate increases, improved sentiments and risk appetite among investors which diverted their investments toward Indian shores.

In terms of sector, FPIs continue to buy financials, automobiles and auto components, capital goods, and construction-related stocks. They were sellers of IT, metals, power, and textiles stocks. Hitesh Jain, Lead Analyst, Institutional Equities at Yes Securities, said money would continue to flow in auto stocks given the strength in passenger car sales and recovery in two-wheeler sales.

He is also optimistic about FMCG stocks as rural demand is expected to recover, while margins have improved for companies amid falling input costs.

Since the benchmark indices are near record levels and valuations are rich, profit booking can be expected in the near term, Geojit’s Vijayakumar said.

Apart from equities, FPIs invested Rs 550 crore in the debt market during the period under review due to the attractive yields offered by Indian debt securities.

So far in 2023, foreign investors have put in over Rs 45,600 crore in Indian equities and close to Rs 8,100 crore in the debt markets.