Foreign portfolio investors (FPIs) returned to Indian markets, marking a net investment exceeding USD 1 billion over the last five trading sessions. On June 14, FPIs invested USD 644.61 million, which pushed their total investment past the 1 billion USD mark.

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Domestic stock markets experienced significant volatility during elections because of the continuous selling by foreign investors. On election result day the markets experienced one of the worst sell-off by foreign investors when election results indicated a lack of majority for any political party.

But after the government formation under the National Democratic Alliance (NDA), the investors confidence has restored leading to renewed foreign investments.

As per the data from the National Securities Depository, on June 10, FPIs had a net investment of USD 805.82 million. This was followed by an investment of USD 317.82 million on June 11. However, on June 12, there was a notable shift as FPIs sold off USD 285.32 million, resulting in a negative net investment for the day. The trend reversed on June 13 with FPIs investing USD 326.46 million, culminating in a record buying spree on June 14 with USD 644.61 million invested.

The cumulative investment by FPIs over these five trading sessions now stands at an impressive USD 1.45 billion. This influx of foreign capital highlights the renewed confidence in the Indian market, particularly following the political stabilization brought about by the formation of the NDA government.

The return of FPIs is a positive indicator for the Indian economy, suggesting that the political stability and policy continuity offered by the new government have effectively mitigated the uncertainties.

In May, FPIs sold equities worth Rs 25,586 crore as per NSDL data, indicating a pattern of sustained and excessive selling in the cash market.

For the year 2024 so far, FPIs have divested equity worth Rs 26,428 crore. A notable trend in FPI activity is the considerable selling through exchanges while simultaneously buying through the primary market route.

The market is gradually stabilizing following the high volatility triggered by the election results, including both exit polls and the actual outcomes.

The budget will also give a policy direction of the new government and the market will adjust itself as per budget announcements.

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