After turning net buyers last month, foreign investors have become aggressive shoppers of Indian equities and pumped in Rs 49,250 crore so far in August on improvement in corporate earnings and macro fundamentals. This was way higher than a net investment of nearly Rs 5,000 crore by Foreign Portfolio Investors (FPIs) in the entire July, data with depositories showed.
FPIs had turned net buyers for the first time in July, after nine straight months of massive net outflows, which started in October last year. Between October 2021 and June 2022, they sold a massive Rs 2.46 lakh crore in the Indian equity markets. In the coming months, FPI flows will largely depend on commodity prices and geopolitical concerns, corporate results and signs from the US Fed on interest rates movements, Vivek Banka, founding member of fintech platform GoalTeller, said.
The ultra-hawkish stance of the US Fed chairman Jerome Powell at Jackson Hole is a short-term negative for equity markets. This might impact FPI flows in the short-term, V K Vijayakumar, Cheif Investment Strategist at Geojit Financial Services, said. According to data with depositories, FPIs pumped a net amount of Rs 49,254 crore in Indian equities during August 1-26. This is the highest investment made by them so far in the current year.
Stronger corporate earnings in spite of higher crude oil prices and fears of global recession are the primary reasons for fund infusion by FPIs, Jay Prakash Gupta, founder of Dhan, said. Shrikant Chouhan, Head – Equity Research (Retail), Kotak Securities, also attributed the inflow to improvement in corporate earnings macro fundamentals.
Foreign investors continued to buy equities in August inspite of rise in US bond yields and rising dollar. The fact that FPIs are buying in India even amidst strengthening dollar is a reflection of their vote of confidence in the Indian economy, Vijayakumar said. US inflation slowed down from a 40-year high in June to 8.5 per cent in July on lower gasoline prices.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said that the net inflows over the last few weeks could be attributed to multiple factors. While inflation continues to be at elevated levels, in the recent times it has risen less than expectation, thus improving sentiments. This fanned expectation that the US Fed would be comparatively less aggressive, than anticipated earlier, with its rate hike. Consequently, it also eased recession fears in the US to some extent thus improving sentiments and investors’ risk appetite, he said.
On the domestic front, correction in the Indian equity markets provided investors a good buying opportunity, he added. FPIs used this opportunity to hand-pick high-quality companies and invest in them. They are now buying stocks of financials, capital goods, FMCG and telecom.
In addition, FPIs infused a net amount of Rs 4,370 crore in the debt market during the month under review. Apart from India, flows were positive in Indonesia, South Korea and Thailand, while it was negative for Philippines and Taiwan during the period under review.