FPIs Turn Net Buyers in June, Invest ₹26,565 Crore in Indian Equities, and Begin July on a Positive Note

Foreign Portfolio Investors (FPIs) have finally broken their two-month selling streak and turned net buyers in June, with a significant inflow of ₹26,565 crore in Indian equities. This shift in sentiment comes as a welcome relief to the Indian markets, which had been plagued by volatility due to various global cues, including the Lok Sabha elections and the performance of Chinese markets.

According to data from the National Securities Depository Ltd (NSDL), FPIs invested ₹7,962 crore in Indian equities in June, resulting in a net investment of ₹14,128 crore. This is a significant turnaround from the previous month, when FPIs had halted their buying streak. The total investment in June stood at a whopping ₹41,757 crore, comprising debt, hybrid, debt-VRR, and equities.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributes the divergence in equity and debt inflows to the inclusion of Indian government bonds in the JP Morgan EM Govt Bond Index and the front-running by investors. “For CY 2024, so far, FPIs have invested only ₹11,162 crore in equity, but the FPI investment in debt for the same period stands at a massive ₹74,928 crore,” he said.

FPIs were seen buying heavily in telecom and financial services in the fortnight ending June 30, as well as in autos, capital goods, healthcare, and IT. On the other hand, they sold off metals, mining, and power, which had seen a sharp rise in recent months. Market analysts believe that FPIs’ selling in India has been triggered by external factors such as rising bond yields in the US and low valuations in other emerging markets.

However, with these external factors changing, FPIs have become buyers in India. “In fact, in recent days, they have been buying the same segments and stocks at a higher price than the price at which they sold. This experience tells us that FPI selling in India is an opportunity for domestic investors,” said Dr. Vijayakumar.

Market experts believe that the investor fraternity is now looking at India as a preferred jurisdiction, driven by a stable government regime, conducive environment, and inflation control. “We believe that India remains an attractive investment destination amid a healthy economic and earnings growth momentum, and FPIs cannot afford to ignore the markets for too long,” said Milind Muchhala, Executive Director at Julius Baer India.

FPI activity in Indian markets has been volatile in recent months. In May 2024, FPIs offloaded ₹25,586 crore worth of Indian equities, while debt inflows stood at ₹8,761 crore. In April, they sold off ₹8,671 crore in equities and ₹10,949 crore in debt markets due to high US bond yields and high Indian market valuations. However, they pumped in ₹35,098 crore in Indian equities in March 2024, the highest inflows recorded in the first three months of 2024.

The inflow into Indian equities stood at ₹1,539 crore in February 2024, while debt market investment rose to ₹22,419 crore during the month. The inclusion of government bonds in JPMorgan and Bloomberg debt indices had triggered foreign fund inflows into debt markets.

For the entire calendar year 2023, FPIs bought ₹1.71 lakh crore in Indian equities and the total inflow stands at ₹2.37 lakh crore, taking into account debt, hybrid, debt-VRR, and equities. FPIs’ net investment in Indian debt market stands at ₹68,663 crore during 2023.

Overall, the return of FPIs to the Indian markets is a positive sign, and it remains to be seen whether this trend will continue in July.

Historical Context:

The article mentions the Lok Sabha elections, which took place in India in April-May 2024. The elections were a significant event in Indian politics, and their outcome had a potential impact on the country’s economy and financial markets. The article also mentions the performance of Chinese markets, which has been a topic of concern for global investors in recent years. The inclusion of Indian government bonds in the JP Morgan EM Govt Bond Index and the Bloomberg debt indices is another important context, as it has triggered foreign fund inflows into debt markets.

Summary in Bullet Points:

• Foreign Portfolio Investors (FPIs) turned net buyers in June, investing ₹26,565 crore in Indian equities. • This is a significant turnaround from the previous month, when FPIs had halted their buying streak. • FPIs invested ₹7,962 crore in Indian equities in June, resulting in a net investment of ₹14,128 crore. • The total investment in June stood at ₹41,757 crore, comprising debt, hybrid, debt-VRR, and equities. • FPIs were seen buying heavily in telecom and financial services, as well as in autos, capital goods, healthcare, and IT. • They sold off metals, mining, and power, which had seen a sharp rise in recent months. • Market analysts believe that FPIs’ selling in India was triggered by external factors such as rising bond yields in the US and low valuations in other emerging markets. • However, with these external factors changing, FPIs have become buyers in India. • Market experts believe that India remains an attractive investment destination due to a stable government regime, conducive environment, and inflation control. • FPI activity in Indian markets has been volatile in recent months, with significant inflows and outflows in different months. • For the entire calendar year 2023, FPIs bought ₹1.71 lakh crore in Indian equities and the total inflow stands at ₹2.37 lakh crore, taking into account debt, hybrid, debt-VRR, and equities. • FPIs’ net investment in Indian debt market stands at ₹68,663 crore during 2023. • The return of FPIs to the Indian markets is a positive sign, and it remains to be seen whether this trend will continue in July.