FPIs shift focus back on Indian market; invests Rs 7,600 cr in a week

Foreign investors seem to have shifted their focus back on the Indian equity markets as they turned net buyers last week with an investment of over Rs 7,600 crore.

This came following a net outflow of Rs 3,920 crore by foreign portfolio investors (FPIs) from equities in the preceding week (February 7-12), data with the depositories showed.

"As the markets began to recover from the Adani shock, the flows from FPIs also improved, suggesting their renewed interest in the prospects of the Indian equity markets," Himanshu Srivastava, Associate Director - Manager Research at Morningstar India, said.

It appears that the sustained selling in India witnessed from early January is over but they might sell again at higher levels, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

As per the data, FPIs have purchased equities worth a net sum of Rs 7,666 crore in the week ended February 17.

Given a more stable economy, strong macros and prospects of higher economic growth, FPIs are now willing to look beyond valuation and other concerns, and pay a premium to the Indian markets, which has the potential to deliver better returns, Srivastava added.

FPIs have been net sellers since the beginning of the year and till February 10, they were net sellers to the tune of Rs 38,524 crore in 2023, including Rs 28,852 crore in January amid concerns of the continuing rate hikes by the major central banks globally to curb in inflation.

Also, the outflows from Indian equities could be attributed to relatively higher valuations, which prompted the FPIs to shift their focus towards other markets having relatively attractive valuations.

Markets such as China, which saw significant erosion in their equity markets due to a series of strict lockdowns, attracted foreign investors after it opened up given its attractive valuation.

The distinctive feature of stock market performance this year is India's underperformance with NSE's benchmark index Nifty 50 down by 1.4 per cent so far. On the other hand, Taiwan index is up by 8.3 per cent and Shanghai composite is up by 3.4 per cent.

In terms of sector, FPIs have been buyers in autos and auto components and construction, while they were sellers in banking and financial services in which they are sitting on good profits, Vijayakumar said.

So far this year, foreign investors have pulled out a net sum of Rs 30,858 crore from equities, while invested a net amount of Rs 5,944 crore in the debt markets.