Foreign portfolio investors (FPIs) have extended their buying spree in Indian equities to nearly ₹19,000 crore in less than two weeks of November. The current month brings in cheer for Indian markets as foreign investors emerged broadly as net buyers amidst a healthy Q2 earnings season and a strengthening in the rupee. Sensex has climbed nearly 1,050 points and Nifty 50 jumped over 350 points so far in November. Indian stocks have become the preferred picks of FPIs. On the contrary, domestic investors have emerged as sellers. FPIs are expected to continue their buying trend in domestic equities.
As per NSDL data, FPIs pumped in ₹18,979 crore in Indian equities between November 1 to 11, while they were sellers in debt and hybrid markets with an outflow of ₹2,784 crore and ₹90 crore respectively. FPIs made a gradual buying in debt-VRR to the tune of ₹65 crore so far in November.
Due to stellar buying in the equities, FPIs' overall buying in the Indian market is around ₹16,169 crore till November 11, in the current month.
Manoj Purohit, Partner & Leader – Financial Services Tax, BDO India said, "November has brought cheer to the Indian Capital Market segment as it witnessed positive net inflows by the FPI community. They turned out to be net buyers after a long wait since August 2022."
Purohit added, "On the macroeconomic front the US Fed rates, volatility in the prices of crude oil, fluctuating US bond yields and the dollar index played a pivotal role in driving the investment sentiments. On the domestic front, the central bank’s consistent efforts in keeping a check on the inflation trends, robust tax collections, rebound of the domestic consumption story to pre-pandemic levels, have enabled India to stand on a better footing as compared to other emerging markets."
Last month, FPIs were net sellers with an outflow of ₹8 crore in the equities. Notably, October is the lowest monthly outflow in the current year.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "In October FPI investment was almost flat with a small sell figure of ₹8 crores. FPIs were sellers in the first half of the month but turned buyers in the second half ending with a flat net figure. There is a major change in the FPI activity in November. According to NSDL data FPIs have bought equity worth ₹18979 crores in November. In fact, they were buyers in all trading days of the month till 11th."
Meanwhile, StockEdge data which tracks the daily performance of FIIs and DIIs on BSE and NSE, revealed that FIIs have infused around ₹12,489.74 crore in Indian stocks so far in November. On the other hand, DIIs have pulled out around ₹5,644.87 crore from the equities.
By end of November 11, the rupee erased the 81 mark against the US dollar. The local unit clocked its best weekly performance in four years on the back of a downside in the US dollar after rosier-than-expected inflation data stirred investors' hope for a less hawkish stance from US Federal Reserve going forward. On Friday, the rupee closed at 80.7950 against the US dollar.
Also, on Friday, Sensex closed at 61,795.04 higher by 1,181.34 points or 1.95%. Nifty 50 ended at 18,349.70 higher by 321.50 points or 1.78%. IT stocks outperformed their counterparts, while substantial gains were added by banking, metals, capital goods, and consumer durables stocks.
So far in November, Sensex and Nifty 50 have climbed by nearly 2% each.
Will the buying trend by FPI continue in the Indian market?
Vijayakumar said, there is a clear change in the approach of FPIs since they bought even when the dollar and US bond yields were rising. Now the situation has changed to be more favourable. Since inflation in the US is showing a moderating trend, dollar and US bond yields are declining.
He added, "This means FPIs are likely to buy more in the coming days." Further, he said, "also, India has the best earnings growth outlook among large economies. However, valuations are getting stretched."
According to Purohit, recently, Singapore surpassed Mauritius to become the second-highest investor in terms of FPI investments in India. USA continues to retain the top spot. Another key reason India is being considered a preferred destination for equity investments is the shift of a few large investments from China which is currently facing the brunt of economic and political uncertainty.
Purohit added, "the volume of foreign fund inflows indicates that India is likely to continue to maintain its top spot as a preferred destination in the coming months as well."