After sustained selling in the last two and a half months, FPIs bought Indian equities worth₹1,433 crore thus far in November, mainly due to the decline in US treasury bond yields and crude oil prices.
Foreign Portfolios Investors (FPIs) were net sellers till November 15. However, they reversed the selling trend by infusing money during November 16-17, data with the depositories showed.
"The ongoing festive season in India has been seen as a contributing factor to the renewed interest of FPIs in the Indian market. Alongside this, a decrease in US Treasury bond yields and a decline in crude oil prices alleviated some of the pressures that prompted the sell-off earlier," Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Adviser India, said.
Some intermittent corrections in the markets could have also provided buying opportunities in a few pockets, Srivastava added.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the resilience of the market and strong up moves on favourable days have forced a rethinking in FPI strategy. That's why they turned buyers on the 15th and 16th of this month after sustained selling in the first two weeks of November.
Market experts now believe that the US Fed is done with rate hikes and will slowly start discounting rate cuts in 2024. If the declining trend in US inflation persists, the Federal Reserve may cut rates by mid-2024.
This can facilitate FPI inflows into emerging markets like India, he added. Before the fund infusion, FPIs dumped Indian equities worth ₹24,548 crore in October and ₹14,767 crore in September, data showed.
Prior to the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and invested ₹1.74 lakh crore during the period.
The prolonged sell-off by FPIs, which began in early September, was influenced by several factors -- the uncertain trajectory of US interest rates, increased yields on US treasury bonds, the impact of higher crude oil prices, and the intensification of geopolitical tensions arising from the conflict between Israel and Hamas.
Additionally, the debt market attracted ₹ 12,330 crore in the period under review after receiving ₹6,381 crore in October, as per the data.
The inclusion of Indian G-Sec in the JP Morgan Government Bond Index Emerging Markets has spurred foreign fund participation in the Indian bond markets. Indian debt yields are comparatively higher than the US debt yields, making them more attractive to FPIs.
The 10-year Indian government bond yield is currently around 7.25%, while the US treasury yield is around 3.8%, Bhuvan Rustagi, COO and co-founder of Per Annum and Lendbox, said. With this, the total investment by FPIs in equity has reached ₹97,405 crore and over Rs 47,800 crore in the debt market this year so far.
Sectorally, FPIs will prefer to invest more in sectors like autos, capital goods, telecom, pharmaceuticals, IT, and construction-related segments in the near term, Geojit's Vijayakumar said.
First Published: Nov 19, 2023 12:29 PM IST
