FPIs turn net buyers, invest around Rs 1,100 crore in July so far as sell-off appears to be paused

The foreign investors have turned net buyers so far this month with an investment of nearly Rs 1,100 crore in the Indian equity market, as the relentless selling appears to have taken a breather.

This comes following a net withdrawal of ₹50,145 crore from equities in June. This was the highest net outflow since March 2020, when they had pulled out ₹61,973 crore from equities, data with depositories showed.

There has been an exodus of foreign portfolio investors (FPIs) from Indian equity markets over the last nine months, since October 2021.

"Given the headwinds in terms of rising inflation and tightening monetary policy, we expect FPI flows to remain volatile," Shrikant Chouhan, Head-Equity Research (Retail), Kotak Securities, said. According to data with depositories, FPIs invested a net amount of ₹1,099 crore in Indian equities during July 1-22.

They have significantly slowed down their relentless selling and have even turned buyers for several days this month particularly during the last few days, Chouhan added.

“The declining trend of net outflow over the last few weeks coupled with occasional buying does signify that the net outflow from FPIs have bottomed out. The net inflow was driven by better earnings and decline in commodity prices,” the analyst said.

Another factor that helped in net inflow was expectation of less aggressive rate hike by the US Federal Reserve in its upcoming policy meeting than what was anticipated earlier. This also softens the dollar index, which augurs well for emerging markets like India, Himanshu Srivastava, Associate Director-Manager Research, Morningstar India, said.

There is also a reduced possibility of recession in the US or it would be less impactful. In addition to that, the recent corrections in the markets have also provided a good buying opportunity for FPIs, he added.

Echoing similar views, Vijay Singhania, chairman at TradeSmart, said, "poor economic data in the US has given hope that the Federal Reserve might not increase rates at the speed as envisaged earlier along with better-than-expected corporate results also helped improve investor confidence".

Finally, Russia opening the tap to allow natural gas flow to Europe has raised hope of a truce going forward. The Russia-Ukraine deal of opening the border for food grains export is also a big boost, he added.

"It appears that INR depreciation is almost over for now. The dollar index which had moved above 109 is now down to 107.21. This is one of the factors that have contributed to the change in FPI strategy," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

He, further, said that the present trend is likely to continue for the near-term. However, a lot will depend on the news from the US, relating to the economy and markets. So far this year, FPIs pulled out around ₹2.16-lakh crore from equities. This was the highest ever net withdrawal by them. Before that, they withdrew ₹52,987 crore in the entire 2008, data showed.

With PTI Inputs