FPIs return as buyers in December, purchase equities worth ₹14,000 crore in Indian stock market

Foreign portfolio investors (FPIs) turned net buyers in December, reversing the trend of fund withdrawals observed over the past two months. This shift was evident in the last three trading sessions, during which FPIs consistently bought Indian equities.

In the most recent session, FPIs purchased Indian equities worth ₹8,539.9 crore, followed by ₹1,797.6 crore and ₹3,664.7 crore in the prior two sessions, bringing the total cumulative inflows to ₹14,002 crore, according to NSDL data.

Notably, FPI selling spree slowed in November as they withdrew ₹21,612 crore from Indian stock market via exchanges during the month, a sharp decline from the ₹94,017 crore sold in October, the largest monthly outflow on record.

The largest outflows were seen in the oil & gas, auto, telecom, and FMCG sectors. Oil & gas and auto experienced continued outflows for the second consecutive month in November, with outflows of ₹1,328 crore and ₹73,452 crore, respectively. Telecom and FMCG also faced outflows of ₹49,883 crore and ₹13,861 crore, respectively.

On the other hand, the IT, BFSI, and realty sectors saw the highest inflows, to the tune of ₹54,239 crore, ₹24,568 crore, and ₹20,292 crore, respectively.

While FPIs were net sellers in November, they continued to invest in the primary market, attracted by more reasonable valuations compared to the high valuations in the secondary market, according to experts. FPIs invested ₹17,704 crore in the primary market during November, resulting in a net outflow of ₹21,612 crore for the month.

FPIs invested ₹1,03,601 crore in the primary market as of November, surpassing the ₹43,347.1 crore invested in 2023. However, they pulled out ₹1,18,620 crore through the stock exchanges, resulting in net outflows of ₹15,019 crore so far.

Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, "FIIs turning buyers in December, in a total reversal of their sustained selling strategy during the last two months, has altered the market sentiments in favour of the bulls. Encouraged by the FII buying, retail investors, too, have jumped onto the buying bandwagon."

"This has triggered short covering, leading to sharp intraday volatility. The 500-point swing in Nifty from the peak to the trough yesterday indicates a tug-of-war between the bulls and the bears. The best strategy in this volatile context would be to remain invested with higher weightage for large caps, where there is valuation comfort," he added.

Front-line indices recover in December

Amid the reversal in FPI buying and strong participation from the retail segment, the Nifty 50 has gained 2.40% so far this month, while the Sensex has risen by 2.37%. The Nifty Midcap 100 has seen a sharp recovery of 4%, and the Nifty Smallcap 100 index has gained even more, rising by 4.3%.

Stocks showed little movement in today’s session after the RBI announced a 50-basis point CRR cut in its MPC meeting, a move already priced by the market.

On the downside, the revision of FY25 GDP growth from 7.2% to 6.6% and the upward revision of inflation forecast from 4.5% to 4.8% highlight India's dual challenges of rising inflation and a slowing economy.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.