FPIs Make a Strong Comeback to Indian Equities with Rs 22,766 Crore Investment in December
Foreign Portfolio Investors (FPIs) have infused a robust Rs 22,766 crore into Indian equities in the first half of December, marking a significant recovery from the heavy outflows observed in previous months. This resurgence is largely attributed to expectations of a rate cut by the US Federal Reserve, coupled with improved global liquidity conditions.
FPI Trends in 2024: A Volatile Journey
December So Far: FPIs have invested Rs 22,766 crore (till December 13), bringing the total FPI investment in 2024 to Rs 7,747 crore, as per depositories’ data.
Previous Months: November and October saw net outflows of Rs 21,612 crore and Rs 94,017 crore, respectively—the highest monthly outflow on record.
September’s High: FPIs recorded a net inflow of Rs 57,724 crore in September, marking a nine-month high.
This volatility underscores the impact of global monetary policies, economic conditions, and geopolitical developments on FPI behavior.
Factors Driving the FPI Turnaround
1. Monetary Policy Expectations:
Anticipation of a shift toward monetary easing by the US Federal Reserve has boosted global liquidity, encouraging investments in emerging markets like India.
2. Domestic Economic Indicators:
The Reserve Bank of India (RBI) recently lowered the Cash Reserve Ratio, enhancing liquidity and boosting investor sentiment.
India’s CPI inflation dropped to 5.48% in November from 6.21% in October, fueling optimism about potential monetary easing by the RBI.
3. Indian Market Appeal:
Sustained interest in India as a growth market remains strong despite high valuations compared to other global markets.
Improved third-quarter corporate earnings and positive economic growth signals are drawing attention.
According to Himanshu Srivastava, Associate Director, Manager Research at Morningstar India, the flow of foreign investments will continue to depend on global monetary policies, domestic economic performance, and geopolitical developments.
Caution Amid Optimism
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, cautioned that while FPIs have turned buyers in December, they remain sellers at higher levels due to stretched Indian market valuations. He also flagged the rising dollar as a potential headwind, which could prompt FPIs to take profits.
Debt Market Trends
FPIs have been active in the debt market as well:
Debt General Limit: Net investment of Rs 4,814 crore.
Debt VRR (Voluntary Retention Route): Net outflow of Rs 666 crore during the period under review.
Year-to-date, FPIs have invested Rs 1.1 lakh crore in the debt market, reflecting their diversified interest in Indian assets.
Looking Ahead
While the current inflows signal renewed FPI interest, sustainability will depend on how Indian markets manage global headwinds like high valuations, geopolitical uncertainties, and a strong dollar. The domestic inflation trajectory and RBI’s monetary stance will also play crucial roles.
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