FPI inflows at Rs 40,000 cr during March so far

FPIs have been changing their strategy in response to the changes in the bond yields in the US. Therefore, now that US bond yields have again spiked up in response to stubborn inflation, they may again turn sellers in some of the days, going forward, observes VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services

Renewed Buying

• Modest investment of Rs1,539 cr in Feb

• Outflow of Rs25,743 cr in Jan

• FII buying includes bulk deals

• Hence, it’s not a true indicator of FPI activity

New Delhi: FPIs came back strongly to invest in the Indian equity markets, buying shares worth Rs40,710 crore in the first fortnight of the month amid an improvement in the global economic landscape and robust domestic macroeconomic outlook. The inflows came following a modest investment of Rs1,539 crore in February and an outflow of Rs25,743 crore in January, data with the depositories snowed. FPIs have been changing their strategy in response to the changes in the bond yields in the US. Therefore, now that US bond yields have again spiked up in response to stubborn inflation, they may again turn sellers in some of the days, going forward, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

In March, Foreign Portfolio Investors (FPIs) turned big buyers, but this figure includes some bulk deals executed through the stock exchanges and, therefore, is not a true indicator of FPI activity. However, the rising trend of FPI investment continues, he added.

“The improvement in the global economic environment as well as Indian macro-economic scenario has prompted FPIs to invest in high growth-oriented markets like India. Also, the recent correction in the market provided a buying opportunity,” said Himanshu Srivastava, Associate Director Manager Research, Morningstar Investment Research India.

Shantanu Bhargava, Managing Director, Head of Discretionary Investment Services, Waterfield Advisors attributed inflows to strong GDP growth, anticipation of shift in the RBI’s policy, with rate decreases of 25-50 basis points in the second half of fiscal year 2024. and expectation of another win for the ruling political party.

Apart from equities, FPIs have injected a massive Rs 10,383 crore in the debt market this month (till March 15). This came in the backdrop of Bloomberg announcing India’s bonds inclusion in its Emerging Market (EM) Local Currency Government Index and related indices from January 31 next year. Moreover, FPIs have been pumping money into the debt markets for the past few months driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index. They invested Rs22,419 crore in February, Rs19,836 crore and Rs18,302 crore in January. JP Morgan Chase & Co. in September last year announced that it will add Indian government bonds to its benchmark emerging market index from June 2024. This landmark inclusion is anticipated to benefit India by attracting around $20-40 billion in the subsequent 18 to 24 months. This inflow is expected to make Indian bonds more accessible to foreign investors and potentially strengthen the Rupee, thereby bolstering the economy.