In just three months into the current fiscal, foreign investors have pumped in over ₹1-lakh crore into Indian equities pushing the market to new highs. Market experts attribute the strong earnings growth of corporate India, stable macroeconomic indicators and easing inflation as the major reasons for overseas investor’s renewed interest in Indian equities.
Foreign portfolio investors (FPIs) have made a net investment of ₹1.03-lakh crore in Indian equities in the April-June period, the highest in the last nine quarters. Prior to this, the highest inflow of foreign investment came in the third quarter of FY21 when FPIs poured ₹1.42-lakh crore in Indian equities.
The inflows in the latest quarter follow ₹26,211 crore of net outflow in the preceding quarter. FPIs turned net buyers of Indian equities since the beginning of the current fiscal with a net investment of ₹11,631 crore in April followed by ₹43,838 crore in May, and ₹47,148 crore in June, which is the highest monthly inflows in the last eleven months.
“The major reason for the sustained FPI flows into India is the reversal in FPI strategy,” says VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
He added that January and February saw massive outflow of FPI money to China triggered by the country’s opening up after Covid and expectations of revival in growth and earnings, a strategy popularly known as ‘Sell India, Buy China’.
“This strategy proved to be a mistake since the prospects of China deteriorated and that of India improved. The Chinese economy is struggling and growth is expected to be muted for many years to come,” he added.
The sustained FPI inflows took the benchmark indices BSE Sensex and Nifty 50 to a new lifetime high. On Friday, the Sensex closed at a new high of 64,718.56 points, while Nifty scaled a new life peak of 19,202, before closing at 19,189 points. The Nifty 50 index has rallied over 11 per cent between March and June, while Sensex gained 10 per cent during this period.
Among the sectors, financial services, automobiles, FMCG, and Healthcare saw increased interest from foreign investors.
However, on the future inflows, Vijayakumar said, valuations in India are rich from a short-term perspective. “Even while continuing to invest in India, FPIs are likely to turn a bit cautious, going forward,” he added.