FPIs return to Indian equities with Rs 24,454 crore inflow in first week of December

After a tough couple of months marked by significant outflows, foreign portfolio investors (FPIs) have made a strong return to Indian equities, infusing Rs 24,454 crore in the first week of December. This sharp reversal follows two months of heavy selling, during which FPIs withdrew Rs 21,612 crore in November and a record Rs 94,017 crore in October, the worst monthly outflow in history.

The renewed interest comes amidst stabilizing global conditions and expectations of possible US Federal Reserve rate cuts, which have improved sentiment. As a result, FPI investments in Indian equities have reached Rs 9,435 crore so far in 2024.

This year, FPIs have also been active in the debt market, investing Rs 1.07 lakh crore. However, FPI investment trends have been volatile, with September seeing a high of Rs 57,724 crore in inflows, contrasting with the heavy outflows in the subsequent months.

Looking ahead, analysts suggest that foreign investment flows will be influenced by several factors, including US economic policies under Donald Trump, inflation rates, interest rate dynamics, and geopolitical conditions. Himanshu Srivastava, Associate Director at Morningstar Investment Research India, emphasized the role of corporate earnings and India’s economic growth in shaping investor sentiment.

Trivesh D, COO of Tradejini, noted that improving global conditions and the likelihood of rate cuts by the US Fed may have contributed to the current FPI inflows. Moreover, the recent market correction could have prompted FPIs to take advantage of attractive valuations.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out that the shift in FPI strategies is reflected in stock movements, particularly in large-cap banking stocks, which have seen reduced FPI interest. However, he noted that this segment still holds potential for growth, attracting more domestic institutional and retail investments. The IT sector is also expected to attract significant FPI interest in the coming months.

In the debt market, FPIs withdrew Rs 142 crore in the debt general limit, while investing Rs 355 crore in the Voluntary Retention Route (VRR).

Overall, FPIs continue to show a keen interest in Indian markets, with equities and debt sectors both seeing substantial inflows this year.