Foreign portfolio investors (FPIs) have returned as net buyers in the Indian stock market in May, after turning net sellers in April due to the ongoing geopolitical crisis in the Middle East. They bought equities worth Rs 1,156 crore in India, according to data from the National Securities Depository Limited (NSDL). With the market at record highs and a pre-election rally underway, FPIs are responding to changes in US bond yields. If these yields fall and the Indian economy continues to perform well, FPIs are likely to turn into aggressive buyers, as stated by VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
In January 2024, FPIs were aggressive sellers in the Indian stock market before becoming net buyers in February and March. Factors such as strong GDP growth forecasts, manageable inflation levels, political stability at the central government level, and indications that the central bank is done tightening its monetary policy have all contributed to a positive outlook for the Indian economy. India’s GDP grew at a significant 8.4 percent during the October-December quarter of the fiscal year 2023-24, making it the fastest-growing major economy. This growth trajectory is expected to continue in the future.
In December, FPIs accumulated stocks worth Rs 66,135 crore, and November saw an inflow of Rs 9,001 crore. Throughout the year, the total inflow from FPIs was about Rs 171,107 crore, with December alone accounting for over one-third of this amount. The strong influx of funds from FPIs supported the benchmark stock indices in reaching all-time highs. Prior to November, FPI participation in Indian stocks was lackluster, with net selling in September and October totaling Rs 14,768 crore and Rs 24,548 crore, respectively.
Before the turnaround in November, FPIs had been buying Indian stocks consistently in the preceding months. In March, April, May, June, July, and August, they purchased stocks worth Rs 7,936 crore, Rs 11,631 crore, Rs 43,838 crore, Rs 47,148 crore, Rs 46,618 crore, and Rs 12,262 crore, respectively. This positive trend in FPI investments in Indian stocks has been driven by various economic factors and market conditions that favor foreign investors. As the Indian economy continues to show resilience and growth potential, FPIs are expected to maintain their interest in the Indian stock market.
