fpi: After 9 months, FPIs return to Indian equities with Rs 5,000-cr investment in July

After nine consecutive months of relentless selling, foreign investors have become net buyers and have invested nearly Rs 5,000 crore in Indian stocks in July due to the weakening dollar index and good corporate earnings. This is in stark contrast to a net withdrawal of Rs 50,145 crore from the stock market in June. This was the highest net outflow since March 2020, when foreign portfolio investors (FPIs) withdrew Rs 61,973 crore from equities, data from custodians showed.

Hitesh Jain, Lead Analyst – Institutional Equities, Yes Securities, believes FPI flows going forward will remain positive in August as the worst for the rupee appears to be over and oil appears to be in range.

“The profit story also remains strong

sales growth is compensating for the shrinking profit margins,” he added.

According to data with custodians, FPIs injected a net amount of Rs 4,989 crore into Indian equities in July. They were buyers for nine days in the month.

Net inflows also propelled equity markets north.

FPIs became net buyers for the first time in July after nine consecutive months of massive net outflows that began in October last year. Between October 2021 and June 2022, they sold a whopping Rs 2.46 lakh crore in the Indian stock markets.

The turning point for net flows in July was the statement by US Federal Reserve Chairman Jerome Powell that the US is not currently in a recession, helping to improve sentiment and risk appetite globally, said Himanshu Srivastava, Associate Director – Research Manager, Morningstar India.

Vijay Singhania, chairman of TradeSmart, said strong corporate numbers also boosted inflows.

The weakening dollar index and the good quarterly results of financial institutions have also helped to improve sentiment, says VK Vijayakumar, Chief Investment Strategist at

said.

In addition, the recent correction in the Indian stock markets has also provided a good buying opportunity, and FPIs have taken advantage of this by hand-picking high-quality companies, Srivastava said.

However, FPIs withdrew a net amount of Rs 2,056 crore from the debt market in the month under review.

According to Srivastava, this reversal in net outflows cannot be taken as a trend change or it can be assumed that FPIs have made a full comeback. While a welcome shift from foreign investors, the scenario continues to evolve at a rapid pace and may take some time to clear.

“The flows are also largely driven by short-term trends, so we will still see long-term money entering the Indian markets, which is stickier. In addition, concerns remain that the US is slipping into recession. Any aggressive rate hike by the US Fed, or its expectation, could further exacerbate capital outflows in emerging markets such as India,” he added.

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