scorecardresearchFPI inflows at 9-month high in May! Will this trend continue?

FPI inflows at 9-month high in May! Will this trend continue?

Updated: 05 Jun 2023, 03:27 PM IST
TL;DR.

FPIs continued their bullish trend in the Indian market for the third straight month, pumping in 43,838 crore in May. This is the highest investment by FPIs in 9 months, since August.

FPIs continued their bullish trend on the Indian markets for the third straight month, pumping in  <span class='webrupee'>₹</span>43,838 crore in May.

FPIs continued their bullish trend on the Indian markets for the third straight month, pumping in 43,838 crore in May.

Foreign portfolio investors (FPIs) continued their bullish trend in the Indian market for the third straight month, pumping in 43,838 crore in May, driven by strong macro developments and reasonable valuations. This is the highest investment by FPIs in 9 months, since August. Before this, the highest net investment they made was 51,204 crore in August.

Meanwhile, they bought Indian equities worth 11,631 crore in April and 7,936 crore in March. In the 2 sessions of June as well, the FPIs have been positive, buying equities worth 6,589 crore. Overall, in 2023 YTD, the FPIs have made inflows worth 35,748 crore.

However, in the first 2 months of the current calendar year, FPI investments were in the red. They sold equities worth 28,852 crore in January and 5,294 crore in February.

The sustained buying by FPIs has also lifted the Indian benchmarks. Nifty jumped as much as 2.6 percent in May, in the green for the third straight month, after a 4 percent rise in April and a 0.3 percent gain in March. It is also positive in June so far, up around 0.5 percent. The index is now just one percent away from its peak hit in December 2022.

According to reports, India attracted the largest investment among all emerging markets, and FPIs were sellers in China.

Meanwhile, among sectors, financials, automobiles, telecom, and construction witnessed maximum FPI inflows.

Apart from equities, FPIs invested 3,276 crore in the debt market in May and 7,471 crore in 2023 YTD. However, the debt segment has witnessed FPI outflows in June so far, worth 73 crore.

Outlook

On the back of fair valuations, robust macro, hopes of a pause in US Fed rate hike, moderating inflation and recovering consumer demand, experts see FPI inflows continuing in India, taking the markets to their all-time high soon.

Commenting on May FPI inflows, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "FPIs were aggressive buyers in the market in May, having invested 43,838 crores through the stock market and primary market put together. A survey among foreign portfolio investors showed that India is now the consensus overweight among all emerging markets. In May, India attracted the largest investment among all emerging markets, and FPIs were sellers in China. FPIs are likely to continue their investment in India in June too since the latest GDP data and high-frequency indicators reflect a robust economy gaining further strength. Financials, automobiles, telecom and construction are attracting big investments."

Vijayakumar further highlighted that Nifty racing to the all-time high of 18,887 and breaking the record are highly possible in the next few trading sessions, however, at record levels, selling pressure is likely since valuations will emerge as a concern.

Meanwhile, Sunil Damania, Chief Investment Officer, MarketsMojo, believes that FPIs will invest approximately 1 lac crore in 2023.

"One of the reasons we believe FPIs will continue to participate in the Indian equities market is due to the great resiliency of the Indian economy. India is part of emerging markets, thus, when the risk-on strategy returns, the emerging market sees increased inflows. In the US, there is debate about cutting interest rates by the end of 2023. If this occurs, we may expect more capital to flow into emerging markets, with India getting its due share in that inflow," he explained.

Umesh Kumar Mehta, CIO, Samco Mutual Fund, also noted that as India continues to be resilient compared to other global economies and there is a chance that the interest rate cycle might turn sooner rather than later, FPI flows could continue flowing into India and other emerging countries, especially in the coming months. However, the intensity of flows will vary depending on a lot of global factors and moving stones, he cautioned.

Article
Source: NSDL
First Published: 05 Jun 2023, 03:27 PM IST