Foreign Investors Infuse Over Rs 1.5 Trillion In Indian Equity Markets In 4 Months, Outpace Global Peers: Report

According to analysts at ICICI Securities, FPI inflows in India were nearly three times higher than the closest competitor on a quarterly basis

Sectorwise, pharma and IT funds performed well recently, while infrastructure and consumption funds also outperformed, the report noted.

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Foreign portfolio investors (FPI) poured in more than Rs 1.5 trillion in India in the last four months starting March 2023, surpassing other global peers, report Business Standard citing a recent ICICI Securities report. As per the report, this is the highest foreign inflow in the securities market followed by Taiwan which saw less than $6 billion FPI investment in the same time frame.

As per the report, Sachin Jain, an analyst with ICICI Securities said that FPI inflows in India were nearly three times higher than the nearest competitor on a quarterly basis. He also noted that this influx was mirrored in performance, with the Nifty able to achieve new life highs as the rest of the markets remain stagnant. 

India's weight in MSCI EM has gradually increased as domestic shares have consistently outperformed, the report noted. A faltering Chinese economy, which accounts for 30 per cent of the MSCI index, has failed to deliver in terms of performance.

"While passive flows may gradually increase in India, active flows should increase at a much faster pace in coming quarters," noted Jain, as per the report. Adding that domestic equity markets declined have 10 per cent from December 2022 to March 2023 but have since recovered to reach fresh all-time highs, driven by strong foreign inflows. Small-cap stocks outperformed, with the Small Cap index rising 30 per cent compared to Nifty 50's 17 per cent during the same period.

Sectorwise, pharma and IT funds performed well recently, while infrastructure and consumption funds also outperformed, the report noted. Adding that the Banking sector saw some consolidation but remained stable.

"Indian economy remains a favored place for investment as has been reflected by strong FPI flows in the past few months. This is likely against the backdrop of stable government polices, robust macro fundamentals, stable inflation and sustainable growth rates. On the other hand, global economies have been witnessing challenges of slower growth, elevated inflation, fears of recession and rate hike cycle by Central Banks. In terms of steady growth, China’s economy has also hit some breaks, pushing investors to rely on other countries for better returns. Countries such as India, Japan and South Korea have made most of the gains compared with global counterparts, especially in equity markets," said Jahnavi Prabhakar, Economist with Bank of Baroda said in a note dated July 2. 

According to an IDBI Capital report, Foreign Portfolio Investor (FPI) flows in June 2023 were positive, with a net inflow of Rs 453 billion compared to Rs 438 billion in May 2023. As per the IDBI Capital data, interests in sectors like financial services, capital goods, and auto & auto ancillary continued to remain strong, while IT and services and oil and gas witnessed outflows.

In June 2023, Financial Services received a net inflow of Rs 192 billion, while Capital Goods saw a net inflow of Rs 85 billion. The Auto & Auto Ancillary sector attracted Rs 58 billion in net inflows, and the Materials sector received Rs 29 billion in net inflows.

Consumer Durables experienced a net inflow of Rs 37 billion during the month, whereas Power & Utilities saw Rs 26 billion of net inflows. Consumer Services sector received Rs 23 billion in net inflows, and FMCG had a net inflow of Rs 20 billion.

Healthcare and Real Estate sectors also received positive net inflows of Rs 18 billion and Rs 6 billion, respectively. However, Media & Telecommunication and Diversified & Others sectors received net inflows of Rs 6 billion and Rs 5 billion, respectively.

On the other hand, Oil & Gas sector experienced net outflows of Rs 6 billion, and IT & Services witnessed net outflows of Rs 46 billion during June 2023. Overall, the financial services sector attracted significant FPI interest, and sectors like Capital Goods and Auto & Auto Ancillary also received notable inflows. Conversely, the IT & Services and Oil & Gas sectors faced net outflows during this period.