FPIs invested Rs 11,730 crore in Indian stock markets last week amid positive market cues

Foreign investors made a strong comeback by infusing a net Rs 11,730 crore (US$ 1.4 billion) in the week ended June 14 on the back of positive cues from domestic and global markets. The net inflows were in stark contrast to the net outflow of Rs 14,794 crore (US$ 1.77 billion) witnessed in the previous week of June 3-7, depository data showed.

With the latest inflows, the net outflow so far till June 14 stood at Rs 3,064 crore.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “After the volatility in the market in the first week of June, stability has returned to the market as indicated by the sharp decline in India VIX from 27 on June 4 to 12.82 on June 14. This decline in India VIX indicates a return of stability and a possible consolidation phase in the market.”

Himanshu Srivastava, Associate Director (Manager Research), Morningstar Investment Research India, said that although in the form of a coalition government, the formation of the NDA government at the Centre for the third consecutive time has raised hopes of continued policy reforms and economic growth.

On the global front, lower-than-expected inflation data in the US has also raised expectations of a one-time interest rate cut this year.

This also led to a decline in US Treasury yields. Srivastava said that these factors led to a risk-taking sentiment among investors, resulting in increased investment in markets like India.

In May, FPIs had pulled out Rs 25,586 crore from equities due to election jitters and in April had pulled out over Rs 8,700 crore due to concerns over changes in India’s tax treaty with Mauritius and the continued rise in US bond yields.

Earlier, FPIs had made a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, while they had withdrawn Rs 25,743 crore in January.

The resilience of the market and the eagerness of retail investors to buy at every dip in the market will force FPIs to reduce their selling.

However, Geojit’s Vijayakumar said if the market continues to rally then FPIs may again turn sellers in India and become buyers in other markets like Hong Kong, which are much cheaper than India.

On the other hand, FPIs have invested more than Rs 5,700 crore in the debt market so far this month (till June 14).

Market experts believe that the long-term outlook for FPI flows into Indian debt is positive given India’s inclusion in global bond indices. However, near-term flows are being impacted by global macroeconomic uncertainty and volatility.

Overall, FPIs have pulled out a net sum of Rs 26,428 crore from equities so far in 2024. However, they have invested Rs 59,373 crore in the debt market.