Foreign Portfolio Investors (FPIs) on Pace to Serve as Net Purchasers in India for Third Consecutive Month

Milling the Indian Stock Exchanges: FPIs Steadily Rising as Net Buyers for Three Straight Months

Foreign Portfolio Investors (FPIs) on Pace to Serve as Net Purchasers in India for Third Consecutive Month

Hey there! This informative piece is all about the recent surge in Foreign Portfolio Investors (FPIs) investing in Indian stock markets. Haven't heard much about it? Let's dive in!

June's Bull RunFast forward to June 2022, and FPIs are on the brink of making it three months in a row as net buyers in Indian equity markets. After serving as net sellers throughout January, February, and March, the tides started turning in April. Now, they have their eyes set on Indian equities. In fact, data from National Securities Depository Limited (NSDL) indicates that FPIs have already bought stocks worth ₹8,915 crore this month so far. And guess what? They bought stocks amounting to ₹4,223 crore in April and an impressive ₹19,860 crore in May!

Fuelling a ResurgenceSo why the drastic change? It's a conglomerate of buoyant atmospheres, both globally and domestically. A relaxing of geopolitical tensions, primarily between the U.S., Iran, and Israel, has helped boost global risk appetite. In turn, this enticing prospect has encouraged FPIs to develop renewed enthusiasm for emerging markets like India.

But it's not just external factors at play here. The Indian economy boasts commendable macroeconomic indicators, such as a sustained low inflation rate, coupled with supportive monetary policy actions, like the Reserve Bank of India's 50 basis points rate cut. These changes have significantly strengthened investor confidence.

Investor Sectoral InterestFPIs, true to form, are always on the lookout for thriving sectors. This particular instance is no different, as they've focused their investments in the financial sector, capital goods, and real estate - those niche areas identified as growth drivers. Simultaneously, they've minimized exposure in sectors that aren't shaping up as swiftly, like FMCG, consumer durables, and IT. This strategic approach has bolstered large-cap indices like the Nifty and Sensex, pushing them to unprecedented highs for 2025.

While FPIs have been all-in on equities, they've maintained a slightly restrained approach to bond markets due to a relatively smaller yield differential compared to that available in US bonds. Nevertheless, the overall liquidity and surging optimism offer a promising foundation for the rally to continue – though high valuations might trigger some profit booking.

** moment of technicality**

One quick observation: as of the writing of this piece, the benchmark Sensex currently sits about 2,000 points below its all-time high of 85,978 points, following a precipitous fall of nearly 13,000 points from its peak. Yet, recent FPI buying has offered a much-needed breather for the indices.

India Shining Amid VolatilityIn the face of widespread global volatility due to concerns over upcoming U.S. reciprocal tariffs with a July 9 deadline on the horizon, India's stock markets have managed to outshine the rest, fulfilling investor expectations. Additionally, a favorable inflation figure has contributed to bolstering domestic equity indices.

As the months fly by, the Sensex and Nifty have enjoyed notable gains, with 2024 posting a net increase of around 9-10%. Both indices rallied by 16-17% cumulatively in 2023 and 3% each in 2022.

References:[1] Enrichment Data - Reuters[2] Enrichment Data - Moneycontrol.com

1. The recent surge in Foreign Portfolio Investors (FPIs) investing in Indian stock markets is primarily due to a conflux of positive atmospheres, both domestically and globally, which has encouraged FPIs to develop renewed enthusiasm for emerging markets like India, with a focus on sectors such as finance, capital goods, and real estate.
2. As FPIs are on the brink of making it three months in a row as net buyers in Indian equity markets, they have already bought stocks worth ₹8,915 crore this month so far, with significant investments also made in April and May amounting to ₹4,223 crore and ₹19,860 crore respectively, indicating a growing interest in business opportunities within India's stock exchange.

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