The relentless selling by overseas investors has ended with foreign portfolio investors (FPIs) registering a net inflow of ₹1,977 crore in July for the first time in the last nine months, with India Inc displaying resilience to withstand inflation headwinds better than its global peers.
The overall outflow in June was ₹51,422 crore, according to NSDL data. Despite the tide turning around, FPIs have pulled out a whopping ₹2.68-lakh crore since October 2021, in straight nine months. Incidentally, it was the longest selling streak by FPIs since the global financial crisis of 2008 when they were net sellers for seven months starting May.
In the last 12 months — from July 2021 to June 2022 — FPIs were net sellers in equity worth ₹4.09-lakh crore in the cash market. During the same period, domestic institutional investors (DIIs) bought equity worth ₹3.28-lakh crore. This brings the net institutional sell figure to ₹80,728 crore.
Decline in dollar index
Following the FPI investment, the benchmark Sensex had gained 4,551 points in July to 57,570 against 53,018 points in June and registered the first month-on-month gain since March. NSE Nifty was up 1,406 points at 17,158 on July 29 against 15,752 logged on July 1.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said the steady decline in the dollar index from above 109 to around 106.20 now has slowed down capital outflows from other markets to the US. Better than expected results from financials have resulted in an increased demand for these stocks. A change in FPI strategy has led to short covering in financials and IT, too, in recent days, he added.
Rate hike cycle
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said Nifty had outperformed its global peers, as most of the global equity indices are trading below their recent support. Global markets continued their strong rally on expectations of the US nearing the end of its rate hike cycle.
The market hopes that the slowing economic growth will result in a more dovish Fed moving forward. Investors will also get updated looks at a key inflation reading and second-quarter employment costs on Friday, which could be key data points for the Fed as it considers its next move, he added.