📷 Image Credits: Mint
Foreign portfolio investors (FPIs) have significantly reduced their selling streak in Indian equities this month after stability returned to Indian markets with a fall in the ‘VIX’ volatility index. FPIs reduced their buying momentum with the onset of the new fiscal 2024-25 (FY25). Volatility due to Lok Sabha elections 2024 and results, outperformance in Chinese markets, hawkish stance from central banks, and other global cues have weighed on the sentiments of foreign investors.
The total debt inflows stand at ₹5,703 crore till the second week of June.
After the roller coaster ride in the market in the first week of June, stability has returned to the market as indicated by the sharp fall in India VIX from 27 on June 4 to 12.82 on June 14. This fall in India VIX indicates the return of stability and a likely consolidation phase in the market, said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Analysts highlighted that the FPI strategy is to sell India which is expensive and buy China which is very cheap mainly through Hong Kong. However, some are bullish on their verdict and expect inflows to resume soon.
The long-term outlook for FPI flows into Indian debt is positive due to India’s inclusion in global bond indices. However, near-term flows are being impacted by global macroeconomic uncertainty and volatility. The trend will reverse once the interest rate outlook becomes clearer, according to analysts.
In May 2024, FPIs offloaded ₹25,586 crore worth of Indian equities, and the debt inflows stood at ₹8,761 crore. Uncertainty over the outcome of the Lok Sabha elections 2024, high US bond yields, high Indian market valuations, and the outperformance of Chinese stocks weighed on sentiments. FPIs offloaded ₹8,671 crore in Indian equities in April and ₹10,949 crore in debt markets over high US bond yields.
