In the initial six trading sessions of December, foreign portfolio investors (FPIs) infused a substantial INR 26,505 crore into the Indian equity markets. This surge in investment is attributed to optimistic expectations surrounding political stability, following the BJP’s success in three key states, coupled with the anticipation of robust economic growth.
This noteworthy influx follows a modest net investment of INR 9,000 crore in October. Prior to this, FPIs had withdrawn a significant sum of INR 39,300 crore in August and September, as reported by depository data.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, foresees a continuation of FPI inflows in the coming days. According to the latest data, FPIs have recorded a net investment of INR 26,505 crore in Indian equities within the current month, up to December 8.
Kislay Upadhyay, founder of FidelFolio Investments, attributes the surge in FPI inflows to the outcomes of major state elections, signaling sustained political stability. Vijayakumar points out that factors such as the prospect of stability post the 2024 General elections, robust economic growth in India, easing inflation, a gradual decline in U.S. bond yields, and corrections in Brent crude prices have collectively favored the Indian market.
Globally, the U.S. Federal Reserve’s indication of potential rate cuts from the first quarter of the next year has resulted in a shift away from a high-interest rate environment. This has consequently weakened the U.S. dollar against other currencies, as noted by Himanshu Srivastava, Associate Director Manager Research at Morningstar Investment Research India.
Furthermore, the decrease in U.S. Treasury Bond yields has prompted foreign investors to reconsider investments in the Indian equity markets, given the improving risk-return profile.
In terms of sectors, FPIs have altered their stance by turning into buyers in leading banks, where they were previously sellers. Large-cap segments such as IT, telecom, automobiles, and capital goods are also witnessing increased buying activity.
On the bond front, the debt market attracted INR 5,506 crore during the period under review. This follows a six-year high inflow of INR 14,860 crore in November and INR 6,381 crore in October, as per available data.
Cumulatively for the year, FPIs have invested INR 1.31 lakh crore in the equity markets and INR 55,867 crore in the debt markets, showcasing sustained investor confidence in the Indian financial landscape.
