Foreign investors make beeline for Indian stocks, turn net buyers in November; Outlook seems firm

Foreign Portfolio Investors have again trained their sight towards, becoming net buyers in the country's stock market. This month they have again made a beeline to invest in Indian stock markets, following a cumulative accumulation of Rs 9,001 crore in November.

The latest inflow comes at a time when India reported strong quarterly growth maintaining its fastest-growing major economy tag, inflation in a comfortable zone, and political stability in the run-up to General Elections 2024.

Data from the National Securities Depository (NSDL) showed that in December so far, they purchased Rs 9,744 crore, which is greater than the Rs 9,001 crore total purchase in November.

Before November, FPI participation in Indian stocks was lukewarm and they had turned net sellers. They sold Rs 14,768 crore and Rs 24,548 crore, in the months of September and October respectively.

Prior to that, FPIs bought Indian stocks worth Rs 7,936 crore, Rs 11,631 crore, Rs 43,838 crore, Rs 47,148 crore, Rs 46,618 crore, and Rs 12,262 crore in March, April, May, June, July, and August respectively, data showed.

So far in 2023, FPIs cumulatively bought stocks worth Rs 114,716 crore, NSDL data showed.

Barring some exceptions, foreign portfolio investors (FPIs) have been selling equities in the Indian markets for over a year, which started in October 2021 for various reasons. In 2022, foreign portfolio investors sold Rs 121,439 crore worth of stocks in India on a cumulative basis, the data available on the NSDL website showed.

"FIIs, who had been net sellers for months, resumed buying in November. Despite this shift, their overall holdings remain at multi-year lows. With India offering attractive growth prospects and political stability, FIIs are finding it hard to resist the allure of Indian debt. The icing on the cake is the decline in US bond yields and crude oil prices, further enhancing India's appeal," said Sunil Nyati, Managing Director of Swastika Investmart Ltd.

Along with the equity segment, debt assets are getting traction among FPIs. Indian debt market saw FPI inflow to the tune of Rs 50,270 in 2023 on a cumulative basis.

"Foreign investors are pouring money into Indian debt, drawn by the country's strong economic outlook and improving public sector health. This inflow is expected to accelerate as political stability solidifies and Indian bonds inch closer to inclusion in global indices," Nyati added.

According to Varun Aggarwal, founder and managing director, Profit Idea, "Due to the fall in bond yields, the return on investment in foreign markets is reducing, and the opportunity for the Indian market opens as the equity market is doing well and the BJP winning state election shows the political stability. Whereas in the U.S. and Europe, the geopolitical tension and war situation questioned the political decision made by them, many new companies are coming to India and started manufacturing and operations on a large scale."

"Also, many joint ventures are in the pipeline to get started and boost the overall economy and companies profits in India, so India is much more likely to see huge investment coming in the coming years," Aggarwal added.

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