New Delhi: Foreign investors made a strong comeback with a net inflow of Rs11,730 crore ($1.4 billion) in the week ending June 14, driven by positive signals from domestic and global markets. The net inflow was in stark contrast to the net outflow of Rs14,794 crore ($1.77 billion) witnessed in the preceding week from June 3-7, data with the depositories showed. With the latest flow, net outflow stood at Rs3,064 crore in the month so far till June 14.

“After the roller-coaster ride in the market in the first week of June, stability has returned to the market as indicated by the sharp fall in India VIX to 12.82 during June 4-14. This fall in India VIX indicates the return of stability and a likely consolidation phase in the market,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Although in a coalition, the formation of the NDA government at the Centre for the third straight term fanned expectation of a continuation of policy reforms and economic growth, Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said.

On the global front, lower-than-expected inflation numbers in the US also raised hopes of one rate cut this year. This also triggered a fall in the US treasury yield. These factors led to risk-taking sentiments among investors, resulting in increased flows into markets like India, Srivastava added.

In May, FPIs pulled out Rs25,586 crore from equities on poll jitters and withdrew more than Rs8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields. Before that, FPIs made a net investment of Rs35,098 crore in March and Rs1,539 crore in February, while they took out Rs25,743 crore in January. The resilience of the market and the eagerness of retail investors to buy every dip in the market will force FPIs to reduce their selling.