Reflecting optimism over the Modi 3.0 Government’s policy continuity, Foreign Portfolio Investors (FPIs) doubled down on their investments in Indian equities last week, becoming net buyers of ₹12,170 crore through June 21, official data showed.
These net inflows contrasted with net outflows of ₹14,794 crore in the first week of June. The FPI net outflows had narrowed to ₹3,064 crore by the end of the second week, after equity markets stabilised post the June 4 election verdict day crash and ensuing volatility.
With the Modi 3.0 government assuming office amid a strong economic growth outlook for India, FPIs have stopped their pre-election selling spree and are increasing their buying interest in equities despite high valuation concerns, say experts.
A reversal of trend can be gauged from the fact that FPIs were net sellers in April and May 2024, at ₹8,671 crore and ₹25,586 crore, respectively, and in January 2024, at ₹25,744 crore.
However, in February and March they were net buyers of domestic equities at ₹1,539 crore and ₹35,098 crore, respectively.
Depositories data showed that although FPIs have made net investments of ₹12,170 crore so far in June, they are still net sellers for the current calendar year to date at ₹11,194 crore, depositories.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said it is interesting to note that the net sell figure of ₹11,194 crore is composed of selling through the exchanges for ₹45,794 crore and buying through the ‘primary market and others’ for ₹34,600 crore.
He added that FPIs are selling where valuations are high and buying where valuations are reasonable.
Early trends in FPI activity in June indicate FPIs buying in financial services, telecom and realty and selling in FMCG, IT, metals and oil and gas, Vijayakumar added.
Sunil Damania, Chief Investment Officer, MojoPMS, said that FPIs have altered their position in the equity market following the election results, injecting ₹23,786 crore since June 10.
There are three primary reasons for this positive inflow. First, the continuity of the government assures ongoing reforms. Second, the Chinese economy is decelerating, as evidenced by a 12 per cent decline in copper prices over the past month. Third, certain block deals in the market have been eagerly taken up by FPIs, Damania said.
“We believe that FPI inflows will remain constrained due to the high valuations currently commanded by the Indian equity market. Additionally, FPIs are no longer the primary market influencers, as robust domestic inflows mitigate the impact of FPI outflows”, he added.
DEBT MARKETS
FPIs continued to pour money in Indian debt ahead of Indian government debt’s inclusion in the J.P.Morgan GBI-EM Global Series of indices from June 28.
So far in June, FPIs have pumped in as much as ₹10,575 crore in Indian government debt. The surprise election verdict of June 4 leading to the formation of a coalition government at the Centre has not in any manner dampened the enthusiasm of foreign investors in Indian government debt, said economy watchers.
Depositories data showed the net inflows in Indian debt from FPIs this calendar year stood at ₹64,245 crore. Only in April werel net outflows to the tune of ₹10,949 crore. All the remaining months have seen inflows, depositories data showed.
India is widely expected in the next 12-18 months to receive FPI investments of about $25-30 billion as a result of inclusion in JP Morgan’s biggest emerging market bond index and Bloomberg Emerging Market (EM) Local Currency Government Index.
Since JP Morgan’s announced its decision in September last year, foreign investment in Indian sovereign bonds has jumped by about $10 billion.