FPIs shift course, infuse Rs 378 crore into equities in November

In November, Foreign Portfolio Investors (FPIs) reversed their bearish stance on Indian equities by making a net investment of Rs 378 crore. This shift followed significant outflows in October and September, where FPIs had dumped Indian equities worth Rs 24,548 crore and Rs 14,767 crore, respectively. Before this outflow, FPIs had been consistently buying Indian equities from March to August, bringing in Rs 1.74 lakh crore during that period.

The recent positive trend in November is attributed to the sharp decline in US treasury bond yields. FPIs were buyers on four days this month, with a substantial investment of Rs 2,625 crore on a single Friday.

The overall trend for 2023 remains positive, with FPIs injecting Rs 96,340 crore into Indian markets so far this calendar year. Analysts believe that improving risk appetite in emerging markets and falling risk-free yields in the US will continue to attract FPI flows towards India.

The decline in US bond yields, particularly the 10-year benchmark bond yield, from 5% in mid-October to 4.40% by the end of November, has played a significant role in slowing down FPI selling. The market's confidence in the Federal Reserve being done with rate hikes has contributed to this shift.

Notably, FPIs are expected to show interest in the banking sector, which they had been selling in the past three months. Analysts predict a large-cap led rally in the market, with sectors like capital goods and consumption attracting flows due to the government's emphasis on capital expenditure and rural spending ahead of the national elections next year.

In addition to equities, the debt market also saw FPI interest, with Rs 12,400 crore invested in the period under review. The inclusion of Indian Government Securities in the JP Morgan Government Bond Index Emerging Markets has encouraged foreign fund participation in the Indian bond markets. Furthermore, Indian debt is considered relatively attractive compared to debt in other emerging markets, offering a higher yield compared to debt in developed markets.