Foreign portfolio investors' turn net buyers; invest Rs 15,280 crore in equities in first week of November

After withdrawing funds in the last two months, foreign investors came back strongly in the first week of November and infused Rs 15,280 crore in Indian equities on hopes that US Federal Reserve would go soft on rate hikes.

Going forward, Foreign Portfolio Investors (FPIs) flows are expected to remain volatile in the near term given the headwinds in terms of monetary tightening, geo-political concerns among others, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said.

According to the data with depositories, FPIs invested Rs 15,280 crore in equities during November 1-4. This came following a net outflow of just Rs 8 crore last month and Rs 7,624 crore in September.

Prior to these outflows, 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.

So far this year, the total outflow by FPIs in equities has reached Rs 1.53 lakh crore.

FPIs were sellers in October initially but the sell-off had slowed drastically on the back of some improvement in the sentiments in the global markets.

Further, in the current month, foreign investors made an investment in hopes that the aggressive rate hike cycle is nearing its end. Also, some of the macro-economic data in the US turned out to be better than expected, thereby indicating a lower probability of any immediate adverse impact on the US economy, Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said.

"The strong FPI flows in Indian markets in the first week of November was on the back of expectations that the US Fed in its FOMC (Federal Open Market Committee) meeting announcement on the 2nd of November would turn more dovish than they had been in the past post another 75 bps rate hike. This has led to a risk on the environment globally thus leading to increased FPI flows to India," Manish Jeloka, Co-head of Products & Solutions, Sanctum Wealth, said.

The fact that FPIs are buying in India even when the US bond yields and dollar are rising, is important. This is the reflection of FPIs' confidence in the Indian economy, particularly when the global economy is slowing down, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Amongst global recessionary conditions, India is slightly better placed due to its domestic demand for consumption. The Diwali festive season also added some cheer. The RBI is continuously monitoring inflation, robust GST collections and improvement in the recent PMI data may have led to the positivity in FPI inflows, Anita Gandhi, whole-time director and Head Institutional Business, Arihant Capital, said.

She said that the ongoing result season, oil and dollar movements, are factors to be closely watched.

"A major likely trend, going forward, is capital moving away from China which is plagued by serious economic issues and some political concerns. Among emerging economies India is best placed to attract the capital moving away from China. Therefore, FPIs' buying trend is likely to continue," Vijayakumar said.

On the other hand, foreign investors have pulled out Rs 2,410 crore from the debt market during the period under review.

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