Foreign Investors turn net buyers in Indian equities for the first time since December

Foreign Portfolio Investors pumped in a total of Rs 7,935.6 crore into Indian equities for the month of March, according to data available on depository services provider CDSL.

This is the first instance of foreign investors turning net buyers into equities after December, when they had pumped in a total of Rs 11,118.9 crore.

However, one must note that the numbers of March will also be influenced by the Rs 15,446 crore investment by GQG Partners into four Adani Group companies, along with a slew of other block deals that took place during the month.

On a net basis, overall FPI flows for the month including equity, debt, and other asset classes stood at Rs 5,899.2 crore.

FPIs had sold equities worth over Rs 1.2 lakh crore in 2022. Despite the inflows of March, overall FPI flows into equities during the first three months of the year stands at a negative Rs 26,210 crore, courtesy the outflows seen during January and February.

The sustained selling from FPIs seems to be over as they have turned buyers over the last few trading sessions, noted VK Vijayakumar of Geojit Financial Services. He also highlighted the sectors where FPIs are putting money to work.

"FPIs have been consistent buyers in capital goods companies, whereas they have alternated between buying and selling in financial services names," he said. Shares of companies like Siemens, Thermax, and ABB India are up anywhere between 17-25 percent so far this year, compared to the Nifty 50, which is still 4.6 percent down year-to-date.

Vijayakumar further said, "Even though Indian valuation continues to be relatively high, the recent market correction has made valuations a bit more reasonable than earlier." Stability in India's Current Account Deficit, resulting in a stable rupee, may prevent the FPIs from turning aggressive sellers, according to Geojit's Chief Investment Strategist.

It does appear that FPIs are turning sanguine on Indian equities. Morgan Stanley recently upgraded India to equal-weight from their earlier rating of underweight citing a narrowing valuation premium and resilient economy.

However, Sunil Tirumalai of UBS believes that further underperformance for the Indian market is warranted from the FII perspective and that he expects another 6-7 percent downside for Indian equities.