Independence Day 2024 | FPIs pumped ₹64,824 crore in Indian equities over 12 months: 5 key reasons behind inflows

Independence Day 2024: Foreign portfolio investors (FPIs) pumped a total of ₹64,824 crore into Indian equities in the last 12 months—from August 2023 to August 2024 so far—driven by India's robust macroeconomic fundamentals and resilient market sentiments. According to depository data, the total investment by FPIs was ₹1,82,965 crore, with a total sell-off of ₹1,18,141 crore in the last year.

FPIs snapped their two-month buying streak in Indian equities and turned net sellers in August. However, they were consistent buyers in June and July as stability returned to Indian markets. However, FPIs halted their buying streak with the onset of the new fiscal year 2024-25 (FY25).

Also Read: FPI outflows reach ₹17,404 crore in August so far; volatility expected to continue

FPIs sold ₹18,824 crore worth of Indian equities, and the net sell-off stood at ₹8,207 as of August 14, taking into account debt, hybrid, debt-VRR, and equities, according to the National Securities Depository Ltd (NSDL) data. The total investment in debt markets stood at ₹8,624 crore so far in August.

FPI activity in the last 12 months

In July, FPIs invested ₹ 202432,365 crore in Indian equities, and the total investment in debt markets stood at ₹22,363 crore, over market resilience, which attracted greater inflows. FPIs snapped their two-month selling streak and turned net buyers in June, infusing ₹26,565 crore in Indian equities and ₹14,955 crore in the debt market. 

The selling reversed after stability returned to the market as election jitters faded. 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. However, they pumped ₹35,098 crore in Indian equities during March 2024 - the highest inflows recorded in the first three months of 2024. FPI outflow declined in February 2024 until they were net buyers by the end of the month despite high US bond yields.

The inflow into Indian equities stood at ₹1,539 crore in February 2024 and the debt market investment rose to ₹22,419 crore during the month on top of the ₹19,836 crore bought in January. The inclusion of government bonds to JPMorgan and Bloomberg debt indices had triggered foreign fund inflows into debt markets.

Also Read: FPIs infuse over ₹11,700 crore into IT sector in July, Banks face significant outflows

FPIs turned massive sellers in January 2024, snapping their buying streak. Investments saw a sharp uptick in December 2023 after they reversed their three-month selling streak in November 2023. However, inflow intensified in December 2023 after the US Federal Reserve signalled the end of its tightening cycle and raised expectations of rate cuts. This led to a crash in US bond yields and triggered foreign fund inflows into emerging markets like India.

According to NSDL data, FPIs bought ₹1.71 lakh crore in Indian equities for the entire calendar year 2023. The total inflow, taking into account debt, hybrid, debt-VRR, and equities, stands at ₹2.37 lakh crore. FPIs' net investment in the Indian debt market stood at ₹68,663 crore during 2023.

FPIs inflows to remain stable in India: 5 key reasons

Market analysts believe the investor fraternity considers India a preferred jurisdiction compared to other markets. They also highlight that FPIs in India will continue to grow under a stable government regime, a conducive environment backed by inflation control, fiscal prudence, and a far-sighted vision for India to become a global hub for capital markets.

Also Read: India’s highest FPI comes from US, followed by Luxembourg and Canada: SEBI

India's strong economic growth, political stability, and ongoing structural reforms make it an attractive destination for global investors,'' said Alok Agarwal, Head - Quant & Fund Manager, Alchemy Capital Management.

‘’Moreover, the increasing integration of India into global supply chains and its strategic initiatives in digital transformation and infrastructure development are likely to draw sustained foreign investments. While short-term volatility in FII flows is expected, the long-term outlook remains positive,'' added Agarwal.

There are some key reasons for this positive inflow. First, the continuity of the government assures ongoing reforms. Second, the Chinese economy is decelerating, as evidenced by a 12 per cent decline in copper prices over the past month. Third, certain block deals in the market have been eagerly taken up by FPIs, according to Sunil Damania, Chief Investment Officer, MojoPMS.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.