FY24 Review: FPIs infused ₹2 lakh crore in Indian equities, highest since FY21
The rise in FPI inflows came on the back of improving macros, declining inflation, hopes of a rate cut in 2024, and the possibility of the incumbent government returning for a third term in the general elections next year.
Moreover, the record-high performance of the Indian market throughout the year, buoyed by investor confidence and robust financial activity, also aided the positive sentiment.
FY24 was a stellar year for the Indian stock market with the benchmark Nifty giving positive returns in 9 of the 12 months. Mid and small-cap stocks also surpassed expectations, delivering impressive returns of 62 percent and 72 percent, respectively. The market saw the introduction of 75 mainboard IPOs. Meanwhile, PSUs, realty, energy, PSU banks, autos, metal, and pharma emerged as major performers.
On the economic front, the recently announced third-quarter GDP growth of 8.4 percent has injected a significant boost into India’s economic outlook, effectively placing the country back in the spotlight for foreign investors.
FPI trend
During the year, FPIs were net sellers in just 3 months and buyers in the remaining 9.
The year started on a positive note with the FPIs buying Indian equities for 5 straight months till August worth ₹1.61 lakh crore. FPIs infused ₹11,631 crore in April, ₹43,838 crore in May, ₹47,148 crore in June, ₹46,618 crore in July and ₹12,262 crore in August. Post that, the FPIs turned net sellers for the next 2 months, selling Indian equities worth ₹14,768 crore in September and ₹24,548 crore in October on the back of a rise in US bond yields and higher crude oil prices.
The momentum returned again in November and December, with FPI inflows at ₹9,001 crore and a massive ₹66,135 crore, respectively.
But in January 2024 again, the FPIs turned negative, selling Indian equities worth ₹25,744 crore.
Finally, in the second last month of the financial year, February, the FPIs turned positive again, recording inflows worth ₹1,539 crore, and they ended the year on a strong note with inflows worth ₹31,056 crore in March.
The steady decline in US bond yields has caused this sudden change in the strategy of FPIs after October. Since FY25 is expected to witness further declines in US interest rates, FPIs are likely to increase their purchases in the next financial year as well, believe experts.
Debt market
The financial year FY24 witnessed FPI inflows in the Indian debt market as well. The FPIs have become net buyers of Indian debt with inflows worth ₹1.19 lakh crore in FY24 after an outflow of ₹8,937 crore in the previous financial year FY23. This was the highest inflow in the debt segment since FY18.
FPIs were positive in the debt segment for all 12 months of the current financial year. They bought ₹12,161 crore in March, ₹22,419 crore in February and ₹19,837 crore in January. They infused ₹18,302 crore in December 2023, ₹14,860 crore in November, ₹6,382 crore in October, ₹938 crore in September, ₹7,733 crore in August, ₹3,726 crore in July, ₹9,178 crore in June, ₹3,276 crore in May, and finally ₹806 crore in April, the first month of the current financial year.
“An interesting feature of the foreign portfolio investment in India this fiscal is the steady growth in debt investment in sharp contrast to the volatile equity investment. This rising trend in debt investment is evident in March, too. The fundamental reason for this sustained FPI flows into debt is the inclusion of Indian bonds in the JP Morgan EM Bond Fund and Bloomberg Bond Index which is expected to bring investment of around $ 25 billion. This investment will begin only by June 2024 and, therefore, FPIs are doing some front running in view of this potential investment.
FPI inflows into debt is likely to continue, going forward. However, a sharp surge in debt flows is unlikely since the US bond yields have also risen in recent days and if the differential between developed market bond yields, particularly US bonds, and Indian bond yields decline, the debt inflows will moderate,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Overall, including equities as well as bonds, FPI inflows stand at ₹3.33 lakh crore, the highest ever till date.
In terms of sectors, FPIs were big buyers in the financial services space. They also bought in sectors like autos, capital goods, and telecom. However, IT stocks have been sold the most by FPIs this year amid recession fears.
Outlook
Going ahead, experts believe FPIs are likely to remain net buyers in Indian equities, especially awaiting the 2024 general election outcome.
“FPI inflows have shown a positive trend. Thanks to the recent announcement of Q3 GDP numbers at 8.4 percent, the persistent performance of large Indian corporates is a major factor in turning the tide green for the Indian equity market.
On the regulatory front, announcements such as the removal of UAE from the grey list, and SEBI’s consultation paper for easing UBO disclosures’ norms for regulated FPIs have been the major catalysts to put India at the forefront for potential long-term investments for the foreign fraternity.
On the macro-economic factors, forthcoming general elections and large companies reflecting profound earnings along with decent valuations would stimulate India to be on the top spot amongst the global emerging markets to look out for at least the next 2-3 years. Large fund houses have also started the exercise of considering the reallocation of capital to India. Seeing the proactiveness of the Indian government in easing the mode of carrying business operations, compliances, and quickly updating the regulations will surely make India is a global hub for carrying out businesses in all the spheres,” explained Manoj Purohit, Partner and leader – FS Tax, Tax and Regulatory Services, BDO India.
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.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 28 Mar 2024, 01:29 PM IST
