FPIs net sellers in August, invest ₹12,262 cr in Indian equities; What next?

The ₹12,262 crore-figure also includes bulk deals and investment in primary market. FPIs infused ₹1,259 crore on September’s first session, including debt, hybrid, debt-VRR, and equities, with a total investment of ₹1,319 crore, showed NSDL data.

In the cash market FPIs sold Indian stocks worth ₹20,620 crore so far this month. Strength in the US dollar index and the US 10-year bond yield remaining high are short-term negatives for FPI flows to emerging markets like India, according to analysts.

Why were FPIs net sellers in August?

Rising bond yields in the US and strong dollar index are negative for capital flows. This was the primary reason why FPIs turned net sellers in the cash market during August.

FPIs have been sellers in most emerging markets in August mainly due to this double whammy of rising dollar and rising bond yields. Profit booking in financials also contributed to FPI selling,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

When will FPI buying spree resume?

Regarding sector specific investments, analysts observed that FPIs have been consistently buying in capital goods. Recently, they have been buyers in health care sector as well.

Analysts observed that the last FED minutes released were more hawkish than expected. The US 10-year yield is trading at a 16-year high and the 2-year yield is trading at 5 per cent. At the same time valuation of Indian equity is not cheap and is supported by funds flow, according to market observers.

‘’The latest jobs report from the US indicates that the US economy is slowing and, therefore, the Fed might not raise rates again. This can bring down the US bond yields and the dollar index. If this scenario unfolds, FPIs may again turn buyers in India,” added Dr. V K Vijayakumar.

FPIs recorded their fifth straight monthly buying in the Indian markets during July 2023 – slightly less that ₹47,148 crore in June – which was the highest monthly FPI inflow since August 2022. Sustained FPI inflows had powered the uptick in the blue-chip Nifty 50 and S&P BSE Sensex, driving the benchmarks to record highs in July.

‘’The FPI flows may remain subdued in the short term until FED clarity but India will remain a sweet spot for long-term allocation among emerging markets. All other emerging markets have some issue or other. The next 5-10 years belong to India and FPIs have no choice but to come to India,” said Mukesh Kochar, National Head – Wealth Management, AUM Capital.

Also Read: FIIs begin September on positive note, invest ₹488 cr in Indian equities; At ₹2,295 cr, DIIs extend buying spree

Meanwhile, on Friday, September 1, domestic markets snapped its five week-losing run today after the gross domestic product (GDP) data showed that the Indian economy grew at its quickest pace in a year during the April-June quarter, which could boost foreign fund inflows.

Sensex rallied around 556 points on the first session of September, logging its best single day in two months, while Nifty closed above the 19,400 level on value-buying in power, metal and oil stocks following strong domestic macro data and global cues.

Updated: 02 Sep 2023, 05:24 PM IST