Foreign investors turn bullish, invest Rs 12,170 crore in equities in June amid hopes of market stability

Foreign portfolio investors (FPIs) have finally snapped their two-month selling streak in Indian equities in June after stability returned to Indian markets with a fall in the ‘VIX’ volatility index. FPIs had halted their buying streak with the onset of the new fiscal 2024-25 (FY25). 

Staging a strong comeback after general election results, foreign investors pumped Rs 12,170 crore in Indian equities so far in June, according to National Securities Depository Ltd (NSDL) data. This inflow was mainly driven by expectations of continued policy reforms and sustained economic growth. 

The latest development is in contrast to the net withdrawal of Rs 25,586 crore by FIIs from equities in May on poll jitters and more than Rs 8,700 crore in April amid concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields. 

With the latest investment, the total outflow of FIIs stood at Rs 11,194 crore till June 21, data with the depositories showed. 

Volatility due to Lok Sabha elections 2024 and results, outperformance in Chinese markets, and other global cues have weighed on the sentiments of foreign investors. 

Early trends in FPI activity in June indicate buying in financial services, telecom and realty and selling in FMCG, IT, metals and oil and gas, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said. 

Additionally, FPIs invested Rs 10,575 crore in the debt market during the period under review, data with the depositories showed. 

Going ahead, Sunil Damania, Chief Investment Officer at MojoPMS, said foreign portfolio investors (FPIs) inflow will remain constrained due to the high valuations currently commanded by the Indian equity market.  

Foreign investors have consistently invested in Indian debt in 2024, except for April, with a total investment of Rs 64,244 crore. India’s inclusion in the debt index positively impacts debt inflows. 

“Irrespective of the short-term changes in flows, we believe India remains an attractive long-term investment destination for global investors,” Nimesh Chandan, CIO, Bajaj Finserv Asset Management Ltd, said. 

In May, FPIs offloaded Rs 25,586 crore worth of Indian equities, and the debt inflows stood at Rs 8,761 crore. Uncertainty over the outcome of the Lok Sabha elections 2024, high US bond yields, high Indian market valuations, and the outperformance of Chinese stocks weighed on sentiments. 

FPIs offloaded Rs 8,671 crore in Indian equities in April and Rs 10,949 crore in debt markets over high US bond yields. However, they pumped Rs 35,098 crore in Indian equities during March - the highest inflows recorded in the first three months of 2024.