June 30th 2024.
In a major turnaround, foreign investors have shifted their focus from pulling out capital to infusing a whopping Rs 26,565 crore into the Indian equities in the month of June. This comes after two months of net outflow, driven by concerns over political stability and a sharp rebound in the market.
Vipul Bhowar, Director of Listed Investments at Waterfield Advisors, believes that all eyes will now be on the upcoming budget and the first quarter results of the fiscal year 2025. These factors will play a crucial role in determining the sustainability of foreign portfolio investments (FPI) in India.
According to data from the depositories, FPIs have made a net infusion of Rs 26,565 crore in equities this month. This is a significant shift from the net outflow of Rs 25,586 crore in May, which was largely influenced by the uncertainty surrounding the general elections, and the outflow of over Rs 8,700 crore in April due to concerns over changes in India's tax treaty with Mauritius and the rising US bond yields.
However, this positive trend was preceded by a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, while January saw a net outflow of Rs 25,743 crore. As of now, the net outflow stands at Rs 3,200 crore for the month, as per the data from the depositories.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributes this shift in FPI sentiments to the political stability in the country, despite the ruling party not securing a majority on its own. The sharp rebound in the market, fueled by consistent buying from domestic institutional investors and aggressive retail buying, has also played a major role in attracting FPIs to the Indian equities.
However, Bhowar points out that the FPI buying has been concentrated on a select few stocks rather than being widespread across the market or sectors. This is because FPIs still consider Indian equities to be overvalued. They are currently favoring sectors such as financial, auto, capital goods, real estate, and select consumer sectors.
Kislay Upadhyay, Manager and Founder of Fidelfolio, believes that with the assurance of government stability, impressive GDP performance and forecasts, stability in consumer price index, ample forex reserves, and a robust banking sector, there will be a steady and substantial inflow of FPIs into the Indian market.
In addition to equities, FPIs also invested Rs 14,955 crore in the debt market in June, taking their total investment in the debt market for the year 2024 to Rs 68,624 crore. The recent inclusion of India in the JP Morgan Bond Index has been viewed positively in the long term, as it is expected to reduce the cost of borrowing for the government and the cost of capital for corporates. This, in turn, will have a positive impact on the economy, equity, and debt market.
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