FPIs reverse selling trend, invest Rs 378 crore in equities in November

Foreign Portfolio Investors (FPIs) have pared their bearish stance on Indian equities during November as they made a net investment of Rs 378 crore on the sharp decline in US treasury bond yields. This came after FPIs dumped Indian equities worth Rs 24,548 crore in October and Rs 14,767 crore in September, data with the depositories showed. Before the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and brought in Rs 1.74 lakh crore during the period.

Overall, the cumulative trend for 2023 remains healthy, with FPIs pouring in Rs 96,340 crore so far this calendar year. "On the way ahead, we think that improving risk appetite in the EM (emerging markets) and falling risk-free yields in the US will draw FPI flows towards India," Hitesh Jain, Strategist, Institutional Equities Research at YES Securities India, said.

According to the data, FPIs made a net investment of Rs 378.2 crore in Indian equities this month (till November 24). Notably, foreign investors were buyers on four days this month with a big buying of Rs 2,625 crore on Friday. "The better-than-expected decline in inflation in mid-October US has given the market confidence to assume that the Fed is done with a rate hike. Consequently, the US bond yields have declined sharply with the 10-year benchmark bond yield correcting from 5 per cent in mid-October to 4.40 per cent now. This has forced FPIs to slow down their selling," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Adviser India, said, "Uncertain global factors continue to dictate the direction of foreign investments into the India equity markets." Additionally, the debt market attracted Rs 12,400 crore in the period under review after receiving Rs 6,381 crore in October, data showed.

The inclusion of Indian G-Sec in the JP Morgan Government Bond Index Emerging Markets has spurred foreign fund participation in the Indian bond markets. Additionally, Indian debt is relatively attractive compared to debt in other emerging markets. Besides, Indian debt offers a relatively high yield compared to debt in developed markets, Bhuvan Rustagi, COO and Co-founder of Per Annum and Lendbox, said.

In terms of sectors, FPIs are likely to buy banking which they have been selling during the last 3 months. A large-cap led rally is likely in the market, going forward, Geojit's Vijayakumar said.
Sectors like capital goods and consumption will attract flows amid the government's emphasis on Capex and rural spending ahead of the national elections next year, YES Securities' Jain said.