After sustained selling in the last two and a half months, FPIs have bought Indian stocks worth Rs 1,433 crore so far in November, mainly due to the fall in US Treasury bond yields and crude oil prices.
Foreign portfolio investors (FPIs) were net sellers till November 15. However, they reversed the sales trend by infusing money between November 16 and 17, depository data showed.
“The current festive season in India has been seen as a contributing factor to the renewed interest of FPIs in the Indian market. In addition to this, a decline in US Treasury bond yields and a fall in crude oil prices eased some of the pressures that led to the earlier sell-off,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Adviser India.
Some intermittent corrections in the markets could also have provided buying opportunities in some pockets, Srivastava added.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said market resilience and strong bullish moves on favorable days have forced a rethink of the FPI’s strategy. That’s why they became buyers on the 15th and 16th of this month after sustained sales in the first two weeks of November.
Market experts now believe that the US Federal Reserve is done with rate hikes and will slowly begin to factor in rate cuts in 2024. If the downward trend in US inflation persists, the Fed Federal could cut rates by mid-2024. This can facilitate FPI inflows into emerging markets like India, he added.
Before the fund infusion, FPIs offloaded Indian stocks worth Rs 24,548 crore in October and Rs 14,767 crore in September, data showed.
Before the exit, FPIs were incessantly buying Indian stocks in the last six months, from March to August, and invested Rs 1.74 lakh crore during the period.
The prolonged FPI sell-off, which began in early September, was influenced by several factors: the uncertain path of US interest rates, rising US Treasury yields, the impact of higher oil prices oil and the intensification of geopolitical tensions. arising from the conflict between Israel and Hamas.
Furthermore, according to the data, the debt market attracted Rs 12,330 crore in the period under review after receiving Rs 6,381 crore in October.
The inclusion of Indian G-Sec in JP Morgan’s emerging market government bond index has spurred participation of foreign funds in Indian bond markets.
Indian debt yields are comparatively higher than US debt yields, making them more attractive to FPIs. The 10-year Indian government bond yield is currently around 7.25 per cent, while the US Treasury bond yield is around 3.8 per cent, said Bhuvan Rustagi, chief operating officer and co-founder by Per Annum and Lendbox.
With this, the total investment by FPIs in equities has reached Rs 97,405 crore and over Rs 47,800 crore in the debt market so far this year.
Sectorally, FPIs will prefer to invest more in sectors like automobiles, capital goods, telecom, pharmaceuticals, IT and construction-related segments in the near term, said Vijayakumar of Geojit.
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