FPIs turn buyers; invest Rs 1,433 crore in equities till mid-November
After sustained selling over the last two and a half months, Foreign Portfolio Investors (FPIs) have bought Indian equities worth Rs 1,433 crore in November. This shift in trend is primarily attributed to the decline in US treasury bond yields and crude oil prices. FPIs were net sellers until November 15, but they reversed this trend by injecting funds into Indian equities during November 16-17, as indicated by data from the depositories.
The change in FPI behavior aligns with evolving global economic factors, especially the decrease in US treasury bond yields and the fall in crude oil prices, which have influenced investment decisions and capital flows in emerging markets like India. The data suggests that FPIs found renewed interest in Indian equities amid these changing dynamics, contributing to positive inflows in November.
The shift in FPI behavior aligns with changes in global economic factors, particularly the decline in US treasury bond yields and the decrease in crude oil prices. These factors often influence investment decisions and capital flows in emerging markets like India. The data suggests that FPIs found renewed interest in Indian equities amid these changing dynamics, contributing to positive inflows in November.
The ongoing festive season in India is considered a contributing factor to the renewed interest of Foreign Portfolio Investors (FPIs) in the Indian market. In addition to the festive season, a decrease in US Treasury bond yields and a decline in crude oil prices have alleviated some of the pressures that led to the earlier sell-off. Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Adviser India, noted that intermittent corrections in the markets may have provided buying opportunities in certain areas.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the resilience of the market and strong upward moves on favorable days as factors that prompted a reevaluation of FPI strategy. This reevaluation led to FPIs turning buyers on the 15th and 16th of the month after sustained selling in the first two weeks of November. The dynamic nature of global economic factors and market conditions continues to influence FPI decisions and capital flows in the Indian market.
The prolonged sell-off by Foreign Portfolio Investors (FPIs), which began in early September, was influenced by several factors. These factors include the uncertain trajectory of US interest rates, increased yields on US treasury bonds, the impact of higher crude oil prices, and the intensification of geopolitical tensions arising from the conflict between Israel and Hamas. Additionally, during the period under review, the debt market attracted Rs 12,330 crore, following Rs 6,381 crore in October, as per the data.
The inclusion of Indian Government Securities (G-Sec) in the JP Morgan Government Bond Index Emerging Markets has led to increased foreign fund participation in the Indian bond markets. Indian debt yields are comparatively higher than US debt yields, making them more attractive to Foreign Portfolio Investors (FPIs).
As of now, the 10-year Indian government bond yield stands at around 7.25 percent, while the US treasury yield is around 3.8 percent. This yield differential presents an appealing opportunity for FPIs, driving greater interest in Indian bonds. The inclusion in global bond indices can further enhance the visibility and attractiveness of Indian debt securities in the international investment landscape.
The comparatively higher Indian debt yields compared to US debt yields make them more attractive to Foreign Portfolio Investors (FPIs). As a result, the total investment by FPIs in equity has reached Rs 97,405 crore, and over Rs 47,800 crore in the debt market, so far this year.
In terms of sectors, FPIs are expected to show a preference for investing more in sectors like autos, capital goods, telecom, pharmaceuticals, IT, and construction-related segments in the near term, according to Vijayakumar from Geojit Financial Services. This sectoral preference indicates FPIs’ strategic allocation based on market dynamics and growth prospects in specific industries.
