Foreign investors pick worth Rs 19,000 cr equities in November on softening US inflation, dollar - what should you know?

Foreign investors have infused close to Rs 19,000 crore in Indian equities so far this month, primarily due to moderating trend in the US inflation and softening of the dollar.

This came following a net outflow of just Rs 8 crore last month and Rs 7,624 crore in September, data with the depositories showed.

Prior to these outflows, Foreign Portfolio Investors (FPIs) were net buyers in August to the tune of Rs 51,200 crore and nearly Rs 5,000 crore in July. Before that, foreign investors were net sellers in Indian equities for nine months in a row which started in October last year.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believes that FPIs are likely to buy more in the coming days as inflation in the US is showing a moderating trend, and dollar and US bond yields are declining.

Also, India has the best earnings growth outlook among large economies. However, valuations are getting stretched, he added.

According to the data, FPIs invested Rs 18,979 crore in equities during November 1-11.

So far this year, the total outflow by FPIs in equities has reached Rs 1.5 lakh crore.

FPIs were sellers in October initially but the sell-off slowed dramatically on the back of some improvement in the sentiments in global markets and they came back strongly in the month of November.

Shrikant Chouhan, Head - Equity Research (Retail), Kotak Securities, attributed the recent inflow to the softening of inflation, global bond yields and dollar index.

"The resilience that Indian equity markets have displayed amid the global turmoil, and the way it has held up against odds and negative cues in recent times have not gone unnoticed.

"As the equity markets have surged relentlessly in recent times, foreign investors have returned to not miss out on the return potential that it offers," Morningstar India Associate Director - Manager Research Himanshu Srivastava said.

Also, the Indian economy is now perceived to be on more solid ground compared with its global counterparts, which is also reflected in a rather strong quarterly result.

Moreover, the stabilization in the rupee against the dollar would have also prompted FPIs to invest in Indian equities, he added.

Manoj Purohit, Partner & Leader Financial Services Tax, BDO India, said the macroeconomic front, the US Fed rates, volatility in prices of crude oil, fluctuating US bond yields and the dollar index played a pivotal role in driving the investment sentiments.

On the domestic front, the RBI's consistent efforts in keeping a check on inflation trends, robust tax collections, rebound of the domestic consumption story to pre-pandemic levels, have enabled India to stand on a better footing as compared to other emerging markets, he said.

According to him, another key reason India is being considered a preferred destination for equity investments is the shift of a few large investments from China which is currently facing the brunt of economic and political uncertainty.

On the other hand, foreign investors pulled out Rs 2,784 crore from the debt market during the period under review.

Apart from India, FPI flows were positive for the Philippines, South Korea, Taiwan and Thailand so far this month.