According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the robustness of the Indian stock market and positive macroeconomic indicators have compelled foreign portfolio investors (FPIs) to shift their stance and become buyers in India. This marks a distinct trend in FPI flows, with equity inflows displaying an erratic nature while debt inflows maintain a steady positive trajectory.
The year commenced with equity outflows of Rs 25,743 crore in January, only to witness a mild shift towards a positive inflow of Rs 1,538 crore in February. However, the real surge came in March, with a sharp increase to Rs 35,098 crore in equity inflows. This pattern illustrates the changing sentiments and growing confidence among FPIs.
Notably, FPIs have shown a keen interest in sectors such as capital goods, automobiles, financials, telecom, and real estate, making significant investments in these segments. Conversely, they have been sellers in the IT sector. Alongside the equity market, debt investments have remained steady, reaching an impressive figure of Rs 55,857 crore in 2024 thus far.
Alok Agarwal, Head Quant & Portfolio Manager at Alchemy Capital Management, highlighted that FPI holdings in the Indian market have declined to a decadal low of 16.6% in 2023. This drop can be attributed to a selloff triggered by portfolio underperformance and the rise in US bond yields. However, despite this decline, FPI inflows in the current fiscal year have remained resilient, signifying foreign investors’ sustained confidence in the Indian market.
In an interesting turn of events, the rise of retail investors in the Indian stock market has played a pivotal role in offsetting the impact of FPI outflows. Domestic mutual funds and direct retail investors have significantly increased their ownership of NSE-listed companies, reducing the influence of FPI flows and bolstering market stability.
The combined effect of FPI interest in diverse sectors, steady debt inflows, and retail investor participation highlights the resilience of the Indian stock market. This evolving landscape demonstrates the attractiveness of the Indian economy to international investors and reinforces its position as a promising investment destination.
