FPIs reverse selling trend ; invest ₹378 crore in equities in November

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FPIs have pared their bearish stance on Indian equities during November as they made a net investment of ₹378 crore.
| Photo Credit: Reuters

Foreign Portfolio Investors (FPIs) have pared their bearish stance on Indian equities during November as they made a net investment of ₹378 crore on the sharp decline in U.S. treasury bond yields.

This came after FPIs dumped Indian equities worth ₹24,548 crore in October and ₹14,767 crore in September, data with the depositories showed.

Before the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and brought in ₹1.74 lakh crore during the period.

Overall, the cumulative trend for 2023 remains healthy, with FPIs pouring in ₹96,340 crore so far this calendar year.

“On the way ahead, we think that improving risk appetite in the EM (emerging markets) and falling risk-free yields in the U.S. will draw FPI flows towards India,” Hitesh Jain, Strategist, Institutional Equities Research at YES Securities India, said.

According to the data, FPIs made a net investment of ₹378.2 crore in Indian equities this month (till November 24).

Notably, foreign investors were buyers on four days this month with a big buying of ₹2,625 crore on Friday.

“The better-than-expected decline in inflation in mid-October U.S. has given the market confidence to assume that the Fed is done with a rate hike. Consequently, the U.S. bond yields have declined sharply with the 10-year benchmark bond yield correcting from 5 per cent in mid-October to 4.40 per cent now. This has forced FPIs to slow down their selling,” V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Adviser India, said, “Uncertain global factors continue to dictate the direction of foreign investments into the India equity markets.”

Additionally, the debt market attracted ₹12,400 crore in the period under review after receiving ₹6,381 crore in October, data showed.

The inclusion of Indian G-Sec in the JP Morgan Government Bond Index Emerging Markets has spurred foreign fund participation in the Indian bond markets.

Additionally, Indian debt is relatively attractive compared to debt in other emerging markets. Besides, Indian debt offers a relatively high yield compared to debt in developed markets, Bhuvan Rustagi, COO and Co-founder of Per Annum and Lendbox, said.

In terms of sectors,  FPIs are likely to buy banking which they have been selling during the last 3 months. A large-cap led rally is likely in the market, going forward, Geojit’s Vijayakumar said.

Sectors like capital goods and consumption will attract flows amid the government’s emphasis on Capex and rural spending ahead of the national elections next year, YES Securities’ Jain said.

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