📷 Image Credits: Mint
Foreign portfolio investors (FPIs) have made a significant turnaround in their investment trend in Indian equities by injecting ₹12,170 crore into the market this month. This shift comes as Indian markets stabilize with a decrease in the ‘VIX’ volatility index, ending a two-month selling streak by FPIs. According to National Securities Depository Ltd (NSDL) data, the total net investment by FPIs stands at ₹25,085 crore as of June 21, including debt, hybrid, debt-VRR, and equities.
The positive inflow follows a period of instability due to various factors, such as the results of the Lok Sabha elections 2024 and outperformance in Chinese markets. FPIs altered their position in the equity market post the election results, injecting ₹23,786 crore since June 10. Three primary reasons for this turnaround include the continuity of the government ensuring ongoing reforms, deceleration of the Chinese economy, and attractive block deals in the market that FPIs have eagerly taken up.
Sunil Damania, Chief Investment Officer at MojoPMS, highlighted that while FPI inflows are concentrated in select stocks, the market is experiencing constraints due to high valuations. With domestic investors playing a significant role in mitigating the impact of FPI outflows, the market dynamics have shifted. The long-term outlook for FPI flows into Indian debt remains positive as a result of India’s inclusion in global bond indices.
Although near-term flows are impacted by global macroeconomic uncertainty and volatility, analysts anticipate a reversal of this trend once there is clarity in the interest rate outlook. The recent injection of funds by FPIs comes ahead of Indian government debt’s inclusion in major global indices, signaling continued foreign interest in the Indian market.
