Foreign portfolio investors (FPIs) have turned positive in January 2022 by pouring over Rs 3,117 crore into Indian markets. This is their first positive month since October 2021. Between January 1, 2022, to January 14, 2022, the foreign investors have infused over Rs. 1,850 cr in the equity market whereas more than Rs. 1,740 cr in the debt-equity mixed, hybrid instruments.
However, the debt segment saw withdrawals of about Rs. 480 cr. The net sum infused by the foreign investors comes to Rs. 3,117 cr. This amount has been negative since October, meaning the foreign investors have been net sellers in the last three months.
The foreign money coming in India seems to have a cautious approach. The experts have noticed that sectoral investment is witnessed in the incoming funds. At the beginning of the month, as the major IT companies declared their third-quarter results, the IT pack showed a positive response. Similarly, as the financial services firms will declare their results, their stocks could show some definite movement as per the industry experts.
The upcoming budget is also a big factor that is keeping FPIs cautious. The foreign investors are preferring to wait for the picture to get clear. Once the government sets forth its economic plans and the growth prospects, the FPIs could take a definite stance and infuse the money accordingly.
As far as the debt investment is concerned, the industry experts say that although the foreign investors have been investing in the Indian debt markets for a while, they haven’t been as active as they used to be. This lack of interest is also evident from the divestment of Rs. 480 cr in the first two weeks of January 2022.
FPI Activity across other Emerging Markets
Apart from the Indian markets, the foreign funds were also following into other emerging markets. Foreign investors were net buyers in developing countries like Indonesia, Thailand, Taiwan, and South Korea. However, in the Philippines, foreign money was seen flowing out.
Indonesia saw the lowest net inflow of $322 mn whereas Taiwan’s inflow was $1,793 mm. Foreign investors were net buyers in South Korea with $1,528 mn and in Thailand, they invested $445 mn. However, they sold net investments worth $4 mn.
The Bottom Line
The buying and selling activity of foreign portfolio investors in the Indian markets has a direct impact on the share prices. Since there are factors like the Finance Budget and quarterly results, investors are taking a cautious approach. Along with that, the increase in Omicron cases and expectations of a rate hike by the US are expected. Due to these factors, the markets could remain volatile.
Who are FPIs?
Foreign portfolio investment is a type of investment where a person invests in various financial assets, such as stocks and fixed deposits. The volatility of foreign markets can increase a person’s risk tolerance. This is why many investors prefer to take on risks and invest in foreign markets.
What is the difference between FPI and FDI?
FPI stands for Foreign Portfolio Investors whereas FDI stands for Foreign Direct Investment. FPIs are merely the investors in the shares of the company whereas FDI involves buying the controlling rights in the operations of the company. FDI is a more comprehensive way of investing where investors get the rights to take an active part in the company’s management.
What are hybrid instruments?
A hybrid instrument is a type of financial instrument that combines the various characteristics of two different financial instruments such as debt and equity. Some hybrids have a higher potential for appreciation but offer lower interest rates. It depends on the portion of the debt and equity mix.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.