Back FPIs inflow over ₹9,700 crore in June so far, can this momentum continue?

Foreign portfolio investors (FPIs) have remained net buyers in in Indian equities in June and in the year so far, while it pumped in over ₹43,000 crore in Indian equities in May, which is the highest investment in nine months by FPIs.

Foreign investors have been buyers across sectors like financials, autos, auto components, capital goods and FMCG. They were big buyers in financials and autos. Selling was low but was focused on IT and metals. The trend in FPIs is likely to continue ahead, which does bring a possible case for the Nifty 50 to touch a new record high.

As per the NSDL data, FPIs inflow in Indian equities comes to ₹9,788 crore in June. In May, FPIs invested ₹43,838 crore, which is not just the highest monthly buying of 2023, but also the highest since November last year.

Source: Livemint

“Sustained buying by FPIs has lifted the Nifty by around 10% from the March lows and consequently, valuations, viewed from the short term perspective, have become challenging. Therefore, FPI are likely to slowdown in the coming days. They are likely to continue buying in financials and autos since the prospects of these sectors look promising," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The recent regulations by Sebi to make disclosure norms more stringent for FPIs has reignited the discussion on India’s stand on promulgating ease of doing business for foreign investors, said Manoj Purohit, Partner & Leader – Financial Services Tax, BDO India.

FPIs holding more than 50% of their equity AUM in a single corporation or with an overall holding in Indian equity markets of over ₹25,000 crore will be classified as 'high risk.' Such FPIs will be required to furnish additional information regarding their ownership, economic interests, and control rights resulting in additional disclosures and compliance burden for foreign funds.

“While lifting the corporate veil to look at the ultimate natural person in the FPI structure, the prevailing challenge of secrecy or privacy laws in certain offshore jurisdictions where the FPI is domiciled could pose a roadblock on disclosure requirements and for compliances. With the present set of developments the regulator desires to ensure utmost disclosures by the funds which would put to rest the ongoing debate of who can and up to what extent one can have economic control and beneficial ownership in the FPIs," said Manoj Purohit, Partner & Leader – Financial Services Tax, BDO India.

“It is expected that FPIs will take the additional disclosure requirement and regulatory announcements made by the SEBI in the right direction which would further accelerate the momentum of India’s growth story," he added.

On Friday, Sensex closed closed 223 points, or 0.35 per cent, lower at 62,625.63 while the Nifty ended at 18,563.40, down 71 points, or 0.38 per cent.

In April month, FPIs inflow stood at ₹11,631 crore and ₹7,936 crore in March. The March investment was mainly driven by bulk investment in the Adani Group companies by the US-based GQG Partners. Year-to-date, FPIs are net buyers with an inflow of ₹35,748 crore in Indian equities..