Strong macro outlook, good earning season bring FPIs to Indian shores

Foreign investors have shown strong buying interest in Indian equities in May and invested more than Rs 23,152 crore in the first fortnight due to lower chances of further rate hikes by the US Federal Reserve, a strong domestic macro outlook and a good earning season.

With this, now Foreign Portfolio Investors (FPIs) have become net buyers of equities in 2023 so far by attracting Rs 8,572 crore, data available with the depositories showed.

Going forward, FPI flows should remain robust for the rest of the month as the global risk on the environment continues for some more time given that major macro data like the US non-farm payroll numbers and CPI numbers have been mostly in line with market estimates, Manish Jeloka, Co-head of Products & Solutions, Sanctum Wealth, said.

“Since the rupee is strong and the dollar is expected to decline in the near term, FPIs are likely to continue buying in India. The improvement in India’s macros also favours continued inflows into India,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

According to data from the depositories, FPIs invested a net sum of Rs 23,152 crore in Indian equities in the first fortnight during May 2-12.

This came following a net infusion of Rs 11,630 crore in equities in April and Rs 7,936 crore in March. The March investment was mainly driven by bulk investment in the Adani Group companies by the US-based GQG Partners. However, if one adjusts for the investments of GQG in Adani Group, the net flow is negative.

Moreover, in the first two months of the year, FPIs pulled out over Rs 34,000 crore.

Sanctum Wealth’s Jeloka said that intervention by governments globally seems to have brought some sense of stability to US regional banks that led to a risk-on environment after a turbulent period in March, leading to an improvement in FPIs flow in April and further in May.

“Lower chances of further rate hikes by the US Fed, strong domestic macro-outlook, and a good earning season have bought foreign investors towards Indian shores,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said.

Also, the rupee strengthening against the dollar has supported FPIs buying. Further, recent market volatility and sporadic correction have also provided some rationality to valuations, he added.

Apart from equities, FPIs have invested Rs 68 crore in the debt market in the first fortnight of May.

In terms of sector, financials continue to be the favourite sector of FPIs. Besides, they were buyers of capital goods and autos too.