FPIs invest ₹1,433 cr in Indian stocks reverse selling streak after 3 months

FPIs have bought ₹1,433 crore worth of Indian equities and the total inflow stands at ₹15,375 crore as of November 17, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. 

FPIs were net buyers till November 15, but reversed the selling trend and invested on November 15 and 16. During August, September October and till November 15, FPIs cumulatively sold stocks for ₹83,422 crore through the exchanges.

‘The resilience of the market and strong up moves on favourable days have forced a rethinking in FPI strategy. That’s why they turned buyers on 15th and 16th of this month after sustained selling in the first two weeks of November,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The sharp decline in the US 10-year bond yield to 4.45 per cent has turned out to be an inflection point for the mother market and thereby to the global stock markets, according to analysts. Before August, FPIs sustained buying in Indian equities for three months.

US bond yields down to 4.45%: What’s behind the correction?

After the latest US Federal Reserve policy outcome on November 1, the US bond yields have sharply corrected to 4.66 per cent on Fed Chair Jerome Powell’s dovish commentary.

The rate-setting Federal Open Market Committee decided to keep the key overnight interest rates unchanged at 5.25-5.50 per cent – a 22-year high mark for the second straight meeting. Other major central banks including Bank of England and Bank of Japan have also kept a pause on the key interest rates – similar to the US Fed.

‘’The main trigger for this reversal in bond yields is the subtle dovish commentary from the Fed chief Jerome Powell that “despite elevated inflation, inflationary expectations remain well anchored.” The market has interpreted this statement as the end of the rate hiking cycle. That’s why yields have corrected sharply,” said Geojits’ Dr. V K Vijayakumar.

FPI inflow likely to continue; Here’s why

Markets now believe that the Fed is done with rate hikes and will slowly start discounting rate cuts in 2024. If the declining trend in US inflation persists the Fed may cut rates by mid 2024. This can facilitate FPI inflows into emerging markets (EMs) like India, according to analysts.

Analysts also believe that the Indian market continues to exhibit resilience even in the midst of several challenges and there is a growing concern among FPIs that if they continue to sell, they will miss out on the potential rally in the Indian market. This might restrain the FPIs from selling and inflows are likely to continue in the coming days.

What do market trends indicate for FPIs?.

An important trend in the market is the increasing clout of domestic institutional investors (DIIs), high net-worth individuals (HNIs) and retail investors and the diminishing influence of FPIs. ‘’FPI selling is completely getting neutralised by DII and individual investor buying. This is the reason why Nifty is around 19,700, the same level which it was in early August,” said Dr. V K Vijayakumar.

Domestic equity benchmark indices ended in red on Friday’s session amid weak cues from the Asian markets and witnessed extremely volatile trading trends. The 30-share BSE Sensex ended lower by 187.75 points or 0.28 per cent at 65,794.73 level while the Nifty 50 closed at 19,731.80 level, down 33.40 points or 0.17 per cent. 

The broader market closed inched higher than the benchmark indices on Friday’s session, the Nifty Midcap 100 closed 0.20 per cent higher and Nifty smallcap ended flat or 0.09 per cent higher.

The RBI action of raising the risk weightage of unsecured loans have affected the sentiments in the banking and financial segments. ‘’However, this is likely to be short lived since the profitability of the leading banks are unlikely to be impacted. Institutions will prefer to invest more in sectors like autos, capital goods, telecom, pharmaceuticals, IT and construction-related segments in the near-term,” said Dr. V K Vijayakumar.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Updated: 18 Nov 2023, 05:14 PM IST