Foreign portfolio investors (FPIs) snapped January’s selling streak in Indian markets, and turned net buyers in February despite high US bond yields. However, the capital outflow from Indian equities by FPIs stands at ₹20,004 crore so far in 2024.
FPIs have bought ₹1,539 crore worth of Indian equities and the total inflow stands at ₹31,817 crore as of February 29, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. On March 1, FPIs again infused ₹4,201 crore in Indian equities but offloaded ₹134 crore from debt markets.
FPIs were big sellers in financials and FMCG in February. FPIs outflow initially declined in February until they were net buyers by the end of the month, despite high US bond yields. Market experts say that normally when the US 10-year yield rises above 4.15 per cent, the FPIs sell heavily.
“For February FPIs have turned buyers in equity for ₹1,539 crore. This is despite the US bond yields ruling high with the 10-year yield at around 4.25 per cent,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Will FPI inflows sustain in March?
Market analysts say that FPIs may again turn sellers in some of the coming days. But they are unlikely to sell aggressively because their selling is not having any impact on the market which is setting new record highs.
FPIs will have to buy the same shares, which they are selling now, at higher prices when the situation turns favourable for FPI buying. Therefore, even if they sell in the coming days, that will be subdued selling. It is important to understand the fact that the DIIs, HNIs and retail investors are calling the shots now, not FPIs,” explained Dr. V K Vijayakumar.
However, FPIs are steadily increasing their buying in debt market. They have bought debt to the tune of ₹22,419 crore in February on top of the ₹19,836 crores which they bought in January. This trend of steady debt investment is likely to continue, according to the market expert.
FIIs and DIIs
Foreign institutional investors (FIIs) were net buyers in Indian markets as outflows reduced significantly this week amid strong market sentiments with domestic equity benchmark Nifty 50 touching record highs buoyed by robust macroeconomic indicators. Domestic institutional investors (DIIs) were net buyers and continuous domestic inflows counterbalanced any outflows by foreign investors.
Even though FIIs were buyers for three out of five sessions this week, yet the net investment value stands at ₹23.51 crore, while DIIs were buyers for three out of five sessions, with a total investment of ₹8,268 crore, according to stock exchange data. On a monthly basis, FIIs have infused over ₹870 crore in cash markets despite high US bond yields.
‘’This indicates that FIIs are unlikely to press big selling pulling the market sharply down. Because of this favourable market construct, dips are getting bought, aided by sustained flows into the market,” said Dr. V K Vijayakumar.
FPI activity in Indian markets
FPIs turned massive sellers in January 2024 snapping their buying streak as investments saw a sharp uptick in December 2023 after they reversed their three-month selling streak in November 2023.
However, inflow intensified in December on strong global cues after the US Federal Reserve signalled the end of its tightening cycle and raised expectations of a rate cut in March 2024. This led to a crash in US bond yields and triggered foreign fund inflows into emerging markets like India.
For the entire calendar year 2023, FPIs bought ₹1.71 lakh crore in Indian equities and the total inflow stands at ₹2.37 lakh crore taking into account debt, hybrid, debt-VRR, and equities, according to NSDL data. FPIs’ net investment in Indian debt market stands at ₹68,663 crore during 2023.
FPI inflows into Indian equities during November 2023 stood at ₹9,001 crore, compared to over ₹39,000 crore worth of shares sold in September and October together, according to NSDL data. Taking into account debt, hybrid, debt-VRR, and equities, FPI inflows were at ₹24,546 crore during the month.
Overall, only four months in 2023–January, February, September, and October- saw net FPI outflows from Indian equities. May, June, and July each recorded FPI inflows above ₹43,800 crore.
