FPIs turn net buyers in Jun; invest Rs 12,714 crore in Indian markets

An Overview

After two months of net selling, foreign portfolio investors (FPIs) turned net purchasers in June, injecting a net Rs. 12,714 crore into Indian markets. In May, foreign investors withdrew Rs. 2,666 crore, while in April, they withdrew Rs. 9,435 crore.

FPIs invested Rs. 15,282 crore in equities between June 1 and June 25, according to depositories data. FPIs withdrew Rs. 2,568 crore from the debt segment at the same time. During the period under review, the total net inflow was Rs. 12,714 crore.

The inflow in June is due to “favourable global cues and better outlook for the Indian economy amidst a substantial decline in the number of pandemic virus cases, easing of lockdown restrictions in some places, and a pick-up in vaccination.

A normal monsoon forecast, supportive monetary policy, a deleverage corporate balance sheet, and a well-capitalized banking system might lead to a “V”-shaped growth rebound in India. High delivery volumes in IT (information technology) and metal stocks signal significant institutional buying. The MSCI Emerging Markets Index gained almost 1.49 percent this week.

Further Key Takeaways

With the exception of India and Indonesia, all major emerging and Asian markets have seen FPI outflows this month. FPI inflows into Indonesia have totaled $363 million so far this month. Taiwan, South Korea, Thailand, and the Philippines, on the other hand, have had month-to-date FPI outflows of $2,426 million, $1,218 million, $124 million, and $64 million, respectively.

From a long-term view, India will attract foreign investments as the macroeconomic climate improves and the domestic economy begins to revive. The global central banks’ ultra-loose monetary policy stance to boost the economy in the aftermath of the coronavirus outbreak had so far opened floodgates of foreign money into emerging economies like India.

The US Federal Reserve’s hawkish remark, on the other hand, dampened sentiment and caused overseas investors to be cautious.

In August, foreign portfolio investors (FPIs) became net buyers, pumping in Rs 975 crore in the first week of the month

In the first five trading sessions of August, foreign portfolio investors (FPIs) were net purchasers to the tune of Rs. 1,210 crore, owing to local reasons. According to depositories’ statistics, they invested Rs. 975 crore in equities between August 2 and 6, while putting in Rs. 235 crore in loans.

This brought the total net investment for the period up to Rs. 1,210 crore. In July, foreign portfolio investors (FPIs) were net sellers of Rs. 7,273 crore. Markets were bolstered by a set of domestic indicators such as recovery in PMI prints, lower unemployment rate in CMIE surveys, and recovery in GST receipts, even as concerns over the third wave lingered in global markets.

However,some analysts pointed out that this does not yet signal a shift in trend. Higher valuations, a jump in oil prices, and a firmer US dollar have kept foreign institutional investors (FIIs) away from Indian equities. With markets approaching all-time highs, they’ve also started taking profits at regular intervals.

The return of foreign institutional investors (FIIs) has sparked renewed interest in large-cap stocks. In terms of the future of FPI flows, investors believe India will continue to be a desirable investment location in the long run. FPI flows are projected to rebound as the macroeconomic climate improves and the domestic economy begins to recover.

Foreign investors, on the other hand, may be put off by the possibility of a third wave. Interim profit booking cannot be ruled out due to high valuations, and currency volatility would continue to impair foreign flows into Indian equities.