FPI infuse Rs 11,730 crore into Indian markets, signalling renewed confidence

Foreign investors made a strong comeback with a net inflow of Rs 11,730 crore (USD 1.4 billion) in the week ending June 14, driven by positive signals from both domestic and global markets. This contrasts sharply with the net outflow of Rs 14,794 crore (USD 1.77 billion) recorded in the preceding week from June 3-7, according to data from depositories. Despite the recent inflow, the net outflow stood at Rs 3,064 crore for the month up to June 14.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that market stability has returned after the roller coaster ride in the first week of June. This is evidenced by the sharp drop in the India VIX from 27 on June 4 to 12.82 on June 14, indicating a likely consolidation phase.

Himanshu Srivastava, Associate Director - Manager Research at Morningstar Investment Research India, highlighted that the formation of the NDA government for a third straight term has bolstered expectations of continued policy reforms and economic growth. On the global front, lower-than-expected inflation numbers in the US have raised hopes of a rate cut this year, triggering a fall in US treasury yields and boosting risk-taking sentiments among investors. This led to increased inflows into markets like India.

In May, Foreign Portfolio Investors (FPIs) withdrew Rs 25,586 crore from equities due to election-related uncertainties, and more than Rs 8,700 crore in April over concerns about changes in India's tax treaty with Mauritius and rising US bond yields. In contrast, FPIs made a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, after withdrawing Rs 25,743 crore in January.

Market resilience and the eagerness of retail investors to buy on dips could compel FPIs to reduce their selling. However, if the market continues to rally, FPIs might shift their focus to other markets like Hong Kong, which are currently more affordable compared to India, according to Vijayakumar.

In the debt market, FPIs have invested over Rs 5,700 crore so far this month (up to June 14). Market experts believe that the long-term outlook for FPI flows into Indian debt remains positive due to India's inclusion in global bond indices. However, near-term flows are influenced by global macroeconomic uncertainty and volatility.

Overall, FPIs have withdrawn a net amount of Rs 26,428 crore from equities in 2024 so far, while they have invested Rs 59,373 crore in the debt market.

(With inputs from agencies.)

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