FPIs continue to be bullish on Indian equities; invest Rs 22,000 cr in July

Foreign Portfolio Investors (FPIs) continue their liking for Indian equities with a net infusion of nearly Rs 22,000 crore in the first week of this month due to resilience of the domestic economy amid an uncertain global macro backdrop. If this trend continues, investment by FPIs in July will exceed the figures recorded in May and June, which were Rs 43,838 crore and Rs 47,148 crore, respectively, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said that FPIs may take some money off the table to maintain caution as concerns over interest rate hikes by the US Federal Reserve in July once again come up.

According to data from the depositories, FPIs have been continuously buying Indian equities since March and poured Rs 21,944 crore this month (till July 7).

Before March, overseas investors pulled out Rs 34,626 crore collectively in January and February.

Kotak Securities’ Chouhan said that India’s emergence as a strong growth-oriented market over others provides major confidence to overseas investors.

“With the revival in monsoon in many parts of the country coupled with expectations of relatively better-than-expected corporate earnings in the first quarter, overseas investors have been increasing exposure to Indian equities,” he added.

The buying spree by FPIs could be attributed to the resilience of the Indian economy amid an uncertain global macro backdrop, Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said. On the global front, the slowdown in the Chinese economy has also led FPIs to shift their focus toward India, he added.

According to Geojit’s Vijayakumar, the major reason for the sustained flows into India is the reversal in FPI strategy to “Buy India, Sell China”.

Also, robust net inflows from FPIs coupled with the strong advance of monsoon in various parts of the country, and buoyancy in global markets helped the Indian markets to scale at an all-time high last week.

Vijayakumar said that sustained FPI buying has pushed valuations into expensive, but not yet in bubble territory.

Apart from equities, overseas investors put in Rs 1,557 crore in the Indian debt market during the period under review. With the latest inflow, investment by FPIs into Indian equities has reached Rs 98,350 crore and Rs 18,230 crore in the debt markets so far this year.

In terms of sectors, FPIs have been steadily buying financial services, automobiles, capital goods, and construction. Recently, they have stepped up buying in FMCG and power. On the other hand, the selling trend in IT continues.