After pulling out funds on a net basis in 2022-23, foreign portfolio investors (FPIs) started the current financial year on a positive note and invested Rs 8,767 crore in the Indian equities so far this month on the reasonable stocks’ valuation.
Going forward, FPIs flow is expected to remain volatile, given the tight monetary policy of the US Federal Reserve, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said.
The US Fed minutes have indicated an interest rate hike by 25 basis points in the coming policy meeting while voicing confidence in the stability of the US financial system.
According to the data with the depositories, FPIs were buyers in all days of April so far, and pumped a net sum of Rs 8,767 crore in Indian equities during April 3-13.
This came after FPIs infused a net sum of Rs 7,936 crore in equities in March, mainly driven by bulk investment in the Adani Group companies by the US-based GQG Partners. However, if one adjusts for the investments of GQG in Adani Group, the net flow is negative.
India has been one of the best investment destinations for FPIs among emerging markets in April so far, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, attributed a slew of factors for inflows, including stabilisation of the global scenario on the back of moderation in apprehensions about the banking crisis in the US and Europe.
In addition, the valuation of Indian equities has come to a reasonable level following its consolidation, which prompted FPIs to invest in Indian stocks, he added.
Naushil Shah – Investment Advisor, TrustPlutus Wealth (India) Pvt Ltd, said valuations have become more palatable given almost zero NSE 50 returns over the last 17-18 months.
“FPI had pulled out a record Rs 1.22 lakh crore from the Indian markets in CY22 – thereby turning underweight (UW). India being a more stable economy compared to other emerging markets (EMs), FPIs are willing to pay a certain premium, since India has a potential to deliver healthy returns over mid-to-long term horizon,” he added.
The correlation between FPI and the equity market has become very significant. FPIs were continuous buyers in the market during the last 10 trading days, and the market posted continuous gains during the last nine sessions.
Overall, FPIs had pulled out a net sum of Rs 37,631 crore from Indian equities in 2022-23 on aggressive rate hikes by central banks globally and a record Rs 1.4 lakh crore in 2021-22.
Before these outflows, FPIs invested a record Rs 2.7 lakh crore in equities in 2020-21 and Rs 6,152 crore in 2019-20.
In the financial year 2022-23, most of the major central banks started hiking the interest rate, which resulted in the departure of hot money from emerging markets, including India. This resulted in an unprecedented rise in prices (Inflation) in most economies.
Apart from global monetary tightening, volatile crude and rising commodity prices, along with Russia and Ukraine conflict, led to an exodus of foreign money in 2022-23.
On the other hand, FPIs have pulled out Rs 1,085 crore from the debt market during the period under review.
In terms of sectors, FPIs were buyers in capital goods, construction, and FMCG; and sellers in IT and oil and gas during the period under review.
The IT sector is likely to witness more selling in the coming days since the growth prospects for the segment appear weak, as indicated by the fourth-quarter results of TCS and Infosys.
However, capital goods, financials and construction-related segments are likely to witness more buying.
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