FPIs invest Rs 7,200 crore in Indian equities in March so far – will the buying sustain?

Foreign investors have pumped Rs 7,200 crore into the Indian equities so far this month, mainly driven by bulk investment in the Adani Group companies by the US-based GQG Partners.

Going ahead, FPIs are likely to be cautious in the near term since there is a risk-off sentiment in equity markets globally due to the stress in the US banking system and the crash in banking stocks, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

The stress appeared in the US banking system after the collapse of Silicon Valley Bank and Signature Bank earlier this month.

Most global equity markets witnessed a sharp recovery, even as macro sentiments remained volatile as frailties in European and US banks were under focus.

"On the economy front, the US Federal Reserve increased the Fed Fund rates by 25 basis points while voicing confidence in the stability of the US financial system. FPIs flow are expected to remain volatile given the tight central bank monetary policy," Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said.

According to the data with the depositories, foreign portfolio investors (FPIs) invested Rs 7,233 crore in Indian equities till March 25.

This came after a net outflow of Rs 5,294 crore in February and Rs 28,852 crore in January. Prior to that, FPIs infused a net amount of Rs 11,119 crore in December, data showed.

The inflow in March is inclusive of the bulk investment of Rs 15,446 crore by GQG in the four Adani stocks, Vijayakumar said.

Excluding this, FPI activity in equities represents a strong selling undercurrent.

In the calendar year 2023, FPIs have sold equities to the tune of Rs 26,913 crore.

On the other hand, FPIs pulled out Rs 313 crore from the debt markets during the period under review.

In terms of sectors, FPIs have been buyers in autos and auto components, financial services, metals and mining and power. However, they sold heavily in IT stocks.

In India, inflows will be mainly targeted at domestic economy-facing sectors like banking, capital goods and autos, Geojit's Vijayakumar said.

A contrarian trend in favour of IT and pharmaceuticals is likely in the near term since the valuations of these segments have turned attractive after the recent corrections, he added.

During the month, FPIs have been sellers in most emerging markets except China, which continues to witness inflows due to the opening-up of trade.

Also, India and Indonesia witnessed inflows during the month under review, while the Philippines, South Korea, Taiwan and Thailand saw a net withdrawal.