Foreign Portfolio Investors (FPIs) continued to double down on Indian equities this month with net flows of ₹15,352 crore till July 12, building on June’s net inflows of ₹26,565 crore that turned them into net buyers for the year, depositories data showed.
The continued buying interest indicated that they may have shrugged off earlier concerns over policy reforms continuity in the wake of the 2024 general elections.
Including the net inflows upto July 12, the total FPI net inflows this calendar year stood at ₹ 18,553 crore. In the first half this calendar year, FPIs had net invested just ₹ 3,201 crore.
In calendar year 2023, FPIs had net invested $21.4 billion in Indian equities.
Foreign brokerage Jefferies had in a recent research note said that it expects FPI flows into India to improve in second half of this calendar year as clarity on government policies emerge post Budget.
Manoj Purohit, Partner and leader - FS Tax, Tax and Regulatory Services, BDO India, said that net FPI inflows has turned green this month, both in the equity and debt segment. “Lot of traction is being seen primarily in the debt segment by European countries, especially Luxembourg which surpassed Mauritius to become one of the desired jurisdiction for injecting funds via the FPI route. Ireland too follows the suite in light of its conducive local fund regime and tax efficient structures for debt segment”, he said.
Purohit noted that the reason for a quick rebound in the capital markets can be attributed to the positive sentiments, stable government’s assurance on continuity of reforms, tepid US Fed rates and a strong domestic demand.
The recent announcements in IFSC Gift City for wide participation for foreign and Indian investors has also diverted the international players to allocate substantial portion of their global portfolio to India markets, Purohit said.
“All eyes are on the much awaited Budget proposals to be tabled on July 23 which will hopefully announce pathbreaking reforms providing India a golden opportunity against the other emerging global markets. As India enters Amritkaal, FPI community will play a major role for the nation to position as the third largest”, Purohit said.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said that the most significant feature of institutional equity flows into the Indian market is the erratic nature of FII flows and the steady growth nature of Domestic Institutional Investors (DII) flows.
“DIIs have been sustained buyers in all months of CY24 so far whereas FIIs alternated between buying and selling.
The reason for this divergence is that FII activity is influenced by external factors like US bond yields and valuations in other markets while DII activity is largely driven by domestic flows into the market”, he said.
Inflows into DIIs like mutual funds are now on an upward trajectory and this will keep the markets resilient. FII flows will continue to be erratic influenced by global factors, Vijayakumar said.
On the debt market side, the FPI net inflows till July 12 stood at just over a billion dollars (₹ 8,484 crore). This comes on the heels of India’s bond inclusion in J P Morgan global bond indices starting June 28. Except for April 2024, all the months of this calendar year has seen net inflows into Indian debt markets.
Indian equity markets have been on a roll since the June 4 general elections verdict day crash. Between June 4 close to now the market has rebounded to post handsome gains across all key indices with benchmark Nifty touching a fresh record high of 24,592 points on Friday.
Nifty50 gained 0.73 percent last week, extending its winning streak for the sixth consecutive week. So far this calendar year, Nifty50 has rallied 12.75 percent.