Institutional investors are pouring money into the Indian equity market. The domestic and foreign portfolio investors together have ploughed $50 billion to purchase shares in FY24, with both investors having spent $25 billion each during the year.
While overseas investors turned net buyers of Indian equities after offloading shares in both FY23 and FY22, domestic institutional investors have been absorbing every time foreign portfolio investors (FPIs) sell. For instance, in FY23, domestic institutional investors (DIIs) bought $32 billion worth of shares when their foreign counterparts sold close to $6 billion worth of equities, according to data compiled from Bloomberg.
To be sure, a large number of bulk deals that were executed on exchanges during the year also pushed FPI numbers higher. Yet, the increase in foreign flows can also be attributed to improving macros, softening inflation and hopes of a rate cut in 2024. Further, the probability of policy continuity at the centre also weighed investors’ sentiment.
At $25 billion, India received equity flows, which is more than all other Asian markets put together, except Japan. While Japan witnessed an inflow of $60 billion, China saw an outflow of $67 billion in the 12 months through December. Some of the flows could have made their way into India. According to reports, emerging market investors in the US are increasingly favouring exchange-traded funds (ETFs) that avoid exposure to China. There is a noticeable uptick in interest in MSCI ex-China ETFs.
The combined market capitalisation of Indian companies surged by $1.3 trillion to $4.4 trillion in FY24. India currently occupies the fifth rank among global equity markets. According to Jefferies, structural domestic flows and potential unicorn listings will propel the market cap beyond $10 trillion by 2030.
Despite this growth, India's weight in global indices remains modest at 1.6%, a factor expected to change as market free float increases, potentially making Indian stocks more appealing to a broader range of global investors.
The benchmark Nifty50 has rallied 29% in FY24. Among sectoral indices, the Nifty Realty and Nifty PSE indexes outperformed others with two-fold jumps during the year.
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