FPIs Reverse Selling Trend, Invest Rs 1,433 Crore In Indian Equities In November So Far

Data revealed that FPIs were net sellers till November 15 and pulled Rs 24,548 crore from the equities market in October, however, the trend reversed after they poured in money during November 16-17.

Foreign Portfolio Investors (FPIs) turned buyers after investing Rs 1,433 crore in Indian equities so far in November, owing to the fall in US treasury bond yields and crude oil prices. These developments came as a breakaway from the selling trend being followed by these investors for the last two and a half months. 

Official data revealed that FPIs were net sellers till November 15, however, the trend reversed after they poured in money during November 16-17, reported PTI. Commenting on the reversal, Himanshu Srivastava, associate director - manager research, Morningstar Investment Adviser India, said, “The ongoing festive season in India has been seen as a contributing factor to the renewed interest of FPIs in the Indian market. Alongside this, a decrease in US Treasury bond yields and a decline in crude oil prices alleviated some of the pressures that prompted the sell-off earlier.” He noted certain corrections in the market could also have generated buying opportunities in some sections. 

V K Vijayakumar, chief investment strategist, Geojit Financial Services, explained, “The resilience of the market and strong up moves on favourable days have forced a rethinking in FPI strategy. That's why they turned buyers on the 15th and 16th of this month after sustained selling in the first two weeks of November.”

The analyst noted that the general belief is the US Fed is not going to pursue more rate hikes and will gradually start discounting rate cuts next year. “ If the declining trend in US inflation persists, the Federal Reserve may cut rates by mid-2024. This can facilitate FPI inflows into emerging markets like India,” Vijayakumar said. 

Data revealed that prior to the fund inflow, FPIs withdrew about Rs 24,548 crore from the equities market in October and Rs 14,767 crore in September. Earlier in the year from March to August, the investors remained consistent buyers and poured in Rs 1.74 lakh crore in the market during the period. 

Notably, the sell-off initiated by the investors in early September was driven by many factors, like the uncertain movement of US interest rates, elevated yields on US treasury bonds, the effect of surged crude oil prices, and the geopolitical tensions arising from the Israel-Hamas conflict. 

However, the debt market saw an influx of Rs 12,300 crore in the period under review after receiving Rs 6,831 crore in October. After Indian G-Sec was included in the JP Morgan Government Bond Index Emerging Markets, this boosted foreign fund participation in the Indian bond markets. Bhuvan Rustagi, COO and co-founder, Per Annum and Lendbox, said, “Indian debt yields are comparatively higher than the US debt yields, making them more attractive to FPIs. The 10-year Indian government bond yield is currently around 7.25 per cent, while the US treasury yield is around 3.8 per cent.”

So far this year, total investment by FPIs in equity has touched Rs 97,405 crore and crossed Rs 47,800 crore in the debt market. Sector-wise, FPIs are expected to invest in sectors like auto, capital goods, telecom, pharmaceuticals, IT, and construction-related segments in the short term, Vijayakumar said.