June 16th 2024.
In a pleasant turn of events, foreign investors have made a strong comeback in the Indian market, with a net inflow of Rs 11,730 crore during the week of June 8-14. This comes as a refreshing change from the previous week, where a net outflow of Rs 14,794 crore was witnessed. The data from the depositories clearly indicates a positive sentiment among investors, both domestic and global.
The month of June has been a roller coaster ride for the market, with a sharp fall in the India VIX from 27 on June 4 to 12.82 on June 14. This decline in the India VIX is a clear indication of the return of stability, which has brought about a likely consolidation phase in the market. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believes that the formation of the NDA government for the third consecutive term has raised expectations for policy reforms and economic growth.
Himanshu Srivastava, Associate Director- Manager Research at Morningstar Investment Research India, also shares a similar view, stating that the global market saw a fall in US treasury yield and lower-than-expected inflation numbers. These factors, along with the positive sentiment in the Indian market, have led to increased risk-taking among investors and a boost in market flows.
The previous months have seen a mixed performance from foreign portfolio investors (FPIs). In May, they withdrew Rs 25,586 crore from equities due to election concerns, while in April, they withdrew Rs 8,700 crore on the back of concerns over India's tax treaty with Mauritius and rising US bond yields. However, they made a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, indicating a positive trend.
The current market resilience and the eagerness of retail investors to buy during dips may lead to a reduction in selling by FPIs. However, if the market continues to rally, they may once again turn to selling in India and investing in other markets like Hong Kong, which are comparatively cheaper. On the other hand, FPIs have invested over Rs 5,700 crore in the debt market so far this month, with experts predicting a positive long-term outlook due to India's inclusion in global bond indices. However, the short-term flows may be affected by global macroeconomic uncertainty and volatility.
In conclusion, FPIs have withdrawn a net amount of Rs 26,428 crore from equities so far in 2024, but have invested Rs 59,373 crore in the debt market. With the market showing signs of stability and positive sentiment, it will be interesting to see the future trends in FPI flows and their impact on the Indian market.
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