FPIs pump ₹2.37 lakh cr in Indian markets; Dec clocks highest inflows in 2023

FPIs have bought 66,135 crore worth of Indian equities and the total inflow stands at 84,537 crore as of December 29, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. FPIs heavily bought stocks in financial services, according to analysts.

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

“2023 has witnessed big investment by FPIs thanks to the sharp uptick in flows in December. FPI inflows which were negative in the previous three months have sharply turned positive in December with total buying of 66,134 crore. This figure includes the buying through stock exchanges and investment in the primary market,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

FPI activity in Indian markets

FPIs were net sellers in August, September and October on a sharp spike in US bond yields amid ongoing geopolitical tensions in the Middle East. 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.

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FPI inflows into Indian equities during November stood at 9,001 crore, compared to over 39,000 crore worth of shares sold in September and October together, according to NSDL data. Taking into account debt, hybrid, debt-VRR, and equities, FPI inflows were at 24,546 crore during the month.

Overall, only four months in 2023–January, February, September, and October- saw net FPI outflows from Indian equities. May, June, and July each recorded FPI inflows above 43,800 crore. 

Why did FPI reverse selling streak by end of November?

Among global cues, the US Fed’s December policy decision has led to an increased inflow in Indian equities. The Federal Open Market Committee (FOMC) meeting left the benchmark interest rates unchanged at 5.25 per cent – 5.50 per cent for the third straight meeting, in line with Street estimates.

Among domestic cues, the Indian economy grew 7.6 per cent during the July-September quarter for fiscal 2023-24 (Q2FY24), remaining the fastest-growing major economy in the world, according to the gross domestic product (GDP) data released by the statistics ministry.

Also, the BJP winning by a majority of votes in the the hindi heartland – Madhya Pradesh, Rajasthan, and Chhattisgarh in the state assembly elections on December 13, instilled a sense of political stability ahead of General Elections 2024. Market analysts say that a stable political environment could boost investor confidence and drive the market higher.

‘’The indication of political stability after the 2024 General elections, strong growth momentum in the Indian economy, inflation cooling off, steady decline in US bond yields and the correction in Brent crude have turned the situation in India’s favour,” said Dr. V K Vijayakumar.

FPI inflow likely to continue; Here’s why

Going forward, FPI buying is likely to sustain, according to analysts. FPIs turned buyers in leading banks where they have been sellers. Large caps in segments like IT, telecom, automobiles and capital goods are also witnessing buying. Moreover, the US Fed’s dovish stance and rate cuts beginning from March 2024 will also likely sustain FPI interest in Indian markets.

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‘’The steady decline in US bond yields have caused this sudden change in the strategy of FPIs. In December, FPIs were big buyers in financial services which explains the resilience of this segment in December. FPIs also bought in sectors like autos, capital goods and telecom,” said Geojits’ Dr. V K Vijayakumar.

‘’Since 2024 is expected to witness further declines in US interest rates, FPIs are likely to increase their purchases in 2024 too, particularly in the early months of 2024 in the run up to the General elections,” added Dr. V K Vijayakumar.

Analysts noted that India has the best prospects among the emerging economies for sustained growth for many years to come. This growth has the potential to create phenomenal wealth through the stock market. FPIs are investing to benefit from this potential wealth creation, according to analysts.

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

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Published: 30 Dec 2023, 05:53 PM IST

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