FPIs started the year on a strong note and have so far extended the buying streak in Indian markets.
The total debt inflows stand at ₹1,522 crore so far this month.
The inflow into Indian equities stood at ₹1,539 crore and the debt market investment rose to ₹22,419 crore in February on top of the ₹19,836 crore bought in January.
The inclusion of government bonds to JPMorgan and Bloomberg debt indices especially triggered foreign fund inflows into debt markets.
Overall, only four months in 2023--January, February, September, and October- saw net FPI outflows from Indian equities.
Foreign portfolio investors (FPIs) have reduced their momentum of buying in Indian equities since the onset of the new fiscal 2024-25 (FY25) after reporting solid inflows in the previous fiscal. FPIs started the year on a strong note and have so far extended the buying streak in Indian markets. However, experts are doubtful if the inflows will continue in near-term due to the India-Mauritius tax treaty.
FPIs have bought ₹13,347 crore worth of Indian equities and the total inflow stands at ₹15,706 crore as of April 12, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. The total debt inflows stand at ₹1,522 crore so far this month.
Also Read: TCS Dividend: Board recommends final dividend of ₹28/equity share; check details
"There is slight deceleration in debt flows which stood at ₹1,521 crore. Friday witnessed big FPI selling to the tune of ₹8,027 crore on fears of changes in India-Mauritius tax treaty. This will weigh on FPI inflows in the near-term till clarity emerges on details of the new treaty,'' said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
FIIs and DIIs
Foreign institutional investors (FIIs) were net sellers in Indian markets as outflows were higher than net investments last week. Inflows led by domestic institutional investors (DIIs) continued which balanced the outflows by foreign investors.
FIIs were sellers for four out of five sessions last week and the net outflow stands at ₹6,526.71 crore, while DIIs were buyers for all sessions, with a total investment of ₹12,232.61 crore, according to stock exchange data.
Will FPI inflows sustain in FY25?
On the macro-economic factors, forthcoming general elections and large companies reflecting profound earnings along with decent valuations would stimulate India to be on the top spot amongst the global emerging markets to look out for atleast next 2-3 years, said market analysts.
Also Read: Multibagger defence PSU hits upper circuit as Defence Ministry issues tender worth ₹65,000 crore for fighter jets
However, apart from the India-Mauritius tax treaty, another major concern is the surcharged geopolitical situation in the Middle East with heightened tensions between Iran and Israel. These will keep the markets on tenterhooks in the near-term, according to market analysts.
The hotter-than-expected inflation in the US has dashed hopes of three rate hikes by the Fed in 2024. Now the market is pricing in only two rate cuts, that too, towards the end of the year. Consequently, the 10-year bond yield has spiked to 4.52 per cent, triggering more FPI outflows from emerging markets like India.
‘’In brief, the coming few days will be tough for FPI which might see more outflows. Since DIIs are sitting on huge liquidity and the retail and HNIs in India are highly optimistic about the Indian market, FPI selling will be largely absorbed by domestic money,'' said Geojit's Dr. V K Vijayakumar.
FPI activity in Indian markets
FPIs pumped ₹35,098 crore in Indian equities during March - the highest inflows recorded in the first three months of 2024. FPI outflow initially declined in February until they were net buyers by the end of the month, despite high US bond yields. The inflow into Indian equities stood at ₹1,539 crore and the debt market investment rose to ₹22,419 crore in February on top of the ₹19,836 crore bought in January.
The inclusion of government bonds to JPMorgan and Bloomberg debt indices especially triggered foreign fund inflows into debt markets. FPIs turned massive sellers in January 2024 snapping their buying streak as investments saw a sharp uptick in December 2023 after they reversed their three-month selling streak in November 2023.
However, inflow intensified in December on strong global cues after the US Federal Reserve signalled the end of its tightening cycle and raised expectations of a rate cut in March 2024. This led to a crash in US bond yields and triggered foreign fund inflows into emerging markets like India.
For the entire calendar year 2023, FPIs bought ₹1.71 lakh crore in Indian equities and the total inflow stands at ₹2.37 lakh crore taking into account debt, hybrid, debt-VRR, and equities, according to NSDL data. FPIs' net investment in Indian debt market stands at ₹68,663 crore during 2023.
Overall, only four months in 2023--January, February, September, and October- saw net FPI outflows from Indian equities. May, June, and July each recorded FPI inflows above ₹43,800 crore.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
Milestone Alert! Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
