FPIs infuse Rs 1.7 lakh cr into Indian equities in 2023

New Delhi: In a remarkable comeback, foreign portfolio investors (FPIs) have pumped Rs1.7 lakh crore into the Indian equity markets in 2023, propelled by confidence in India’s robust economic fundamentals amid a challenging global landscape.

The year 2023 has witnessed massive investment by FPIs, thanks to the sharp uptick in inflows of Rs66,134 crore in December. Going forward, FPI flows are expected to be robust. However, their allocation is likely to be selective, said Kislay Upadhyay - smallcase Manager and founder of Fidel Folio.

Anticipating a continued decrease in the US interest rates throughout 2024, it is likely that FPIs are likely to increase their purchases, especially in the early months of the New Year in the run-up to the general elections, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

In 2023, FPIs made a net investment of Rs1.71 lakh crore in equities and Rs68,663 crore in the debt markets. Together, they infused Rs2.4 lakh crore into the capital market, as per the data available with the depositories. The latest flow came after Indian equities witnessed a worst net outflow of Rs1.21 lakh crore by FPIs in 2022 on aggressive rate hikes by the central banks globally. Before the outflow, FPIs invested money in the last three years. FPIs made a net infusion of Rs25,752 crore in equities in 2021, Rs1.7 lakh crore in 2020, and Rs1.01 lakh crore in 2019.

“India’s robust economic outlook, resilience to geopolitical issues, and strong domestic consumption story make it an attractive investment destination,” said Abhishek Jain, head (research) at Arihant Capital.

Of Rs1.71 lakh crore inflow this year, more than Rs66,000 crore has been invested in December, following the enhanced political stability, owing to the BJP’s success in recent elections across three significant states. Before the huge infusion in December, FPI inflows were negative in the previous three months.

“The steady decline in US bond yields has caused this sudden change in the strategy of FPIs,” Geojit’s Vijayakumar said.

After a three-year retreat, foreign investors staged a comeback in the debt markets this year, pouring Rs68,663 crore in 2023. This marks a significant shift in their capital flow pattern. This huge flow includes a staggering investment of Rs18,302 crore in December.