Foreign investors demonstrated a significant turnaround in February, injecting over Rs 1,500 crore into Indian equities, a reversal from the substantial outflows witnessed in the previous month. This shift was primarily attributed to robust corporate earnings and positive economic growth.
Data from depositories revealed that Foreign Portfolio Investors (FPIs) continued their bullish stance on the debt markets, infusing over Rs 22,419 crore during February.
Mayank Mehraa, smallcase manager and principal partner at Craving Alpha, expressed optimism for FPI flows in March, contingent upon the sustained positive trajectory of the economy and corporate performance.
In February, FPIs recorded a net investment of Rs 1,539 crore in Indian equities, following a withdrawal of Rs 25,743 crore in January. The resurgence in inflows was fueled by strong corporate earnings and positive economic indicators, despite concerns over stretched valuations in the preceding month.
Himanshu Srivastava, Associate Director at Morningstar Investment Research India, suggested that the global economic environment’s improvement likely influenced FPIs to seek investments in high-growth markets like India.
Globally, January’s inflation figures in the US met expectations, with the lowest annual increase in nearly three years, raising anticipation of a US Federal Reserve rate cut.
Domestically, robust Q3 GDP data showcased strong growth, further attracting foreign investors.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted the inflow despite high US bond yields, with the 10-year yield around 4.25 percent.
In terms of sectors, FPIs were significant sellers in financials and FMCG during February.
On the debt front, FPIs have consistently injected funds into the market, driven by the forthcoming inclusion of Indian government bonds in the JP Morgan Index.
They infused Rs 22,419 crore in February, following significant investments in previous months: Rs 19,836 crore in January, Rs 18,302 crore in December, Rs 14,860 crore in November, and Rs 6,381 crore in October.
JP Morgan’s decision to add Indian government bonds to its benchmark emerging market index from June 2024 is anticipated to attract substantial investments, potentially ranging from USD 20-40 billion over the subsequent 18 to 24 months.
This influx is expected to enhance accessibility to Indian bonds for foreign investors, potentially strengthening the rupee and bolstering the economy.
So far this year, equities witnessed a total outflow of Rs 24,205 crore, while the debt market saw an inflow of Rs 42,000 crore.
