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Published: August 14, 2023
Updated: August 14, 2023

FPIs Find Haven in Indian Equities Amid Global Uncertainty and China Concerns

Foreign Portfolio Investors (FPIs) have chosen the stability of Indian equities amidst global market uncertainty and economic worries centred around China. In the first eleven days of August, FPIs have made a net investment of Rs 3,272 crore in Indian equities, reversing a temporary withdrawal seen in the first week of the month.

Market Insight: Seeking Stability:

Amid a robust three-month market rally, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, anticipates some rational profit booking by FPIs. The resolute resilience and stability of the Indian markets have once again attracted FPI attention, driven by concerns over the global economic environment and China's economic trajectory.

Global Uncertainties Loom:

With the global economic climate getting increasingly challenging due to a slowdown in Chinese demand, any weaknesses in international equities could lead to volatile fluctuations in local shares. Srikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, points out that this volatility might result in the FPI flow becoming less predictable in the near future.

July's Momentum and the Resilient Indian Economy:

Before August's influx, Indian equities had experienced a continuous net inflow over the previous five months, from March to July, driven by the strength of the Indian economy amidst global uncertainty. During the last three months (May, June, and July), FPIs had invested over Rs 40,000 crore each month.

Factors Influencing FPI Interest:

The ongoing earnings season for the June quarter has exceeded expectations, providing additional positive sentiment to the market. Despite trading at elevated levels, the market's Price-to-Earnings (PE) ratio has improved due to strong corporate performance, which has garnered FPI interest. Additionally, India's relatively stable Treasury rates, in contrast to the volatile US 10-year rates, enhance India's appeal for FPIs.

Inflow Statistics and Sectoral Preferences In July, the net inflow reached Rs 46,618 crore, with June and May witnessing inflows of Rs 47,148 crore and Rs 43,838 crore, respectively. FPIs have shown interest in sectors such as financials, capital goods, and IT. Notably, the trend indicates that FPI selling is balanced by robust buying from domestic institutional investors (DIIs).

Debt Market and Overall Inflow:

Apart from equities, FPIs have invested Rs 2,860 crore in the debt market during the evaluated period. The cumulative inflow for equity and debt markets has reached Rs 1.26 lakh crore and Rs 23,300 crore, respectively, this year.

Amidst global uncertainties and concerns about China's economic trajectory, Foreign Portfolio Investors have found a haven in the resilience and stability of Indian equities. With India's attractive PE ratio, strong corporate performance, and stable Treasury rates, FPIs continue to see opportunities in the country's markets, further buoyed by the positive sentiment driven by better-than-expected earnings.