Foreign Portfolio Investors (FPIs) Boost Indian Equities with ₹1,156 Crore Investment, Yet Remain Net Sellers in Debt Market

• Foreign portfolio investors (FPIs) have ended their April selling streak and have become net buyers in Indian equities, despite continued sell-offs in the debt market.
• Last month, FPIs became net sellers in Indian markets, reducing their buying momentum with the start of the new fiscal year 2024-25 (FY25).
• According to data from the National Securities Depository Ltd (NSDL), FPIs invested ₹1,156 crore in Indian equities, and the total outflow stands at ₹771 crore as of May 3, considering debt, hybrid, debt-VRR, and equities.

Foreign portfolio investors (FPIs) have turned net buyers in Indian equities, ending their April selling streak. However, the sell-off continues in the debt market.

Will FPI inflow continue in Indian markets?

Market analysts suggest that the US Federal Reserve’s decision indicates rate cuts much lower than expected earlier this year. Inflation has remained stubborn at lower levels. However, the latest jobs data in the US indicates a slowing economy, and therefore, rate cuts may be necessary. Experts also highlight that the positive factor is the fact that all FPI selling in the equity markets is getting absorbed by DIIs, HNIs, and retail investors. This is the only factor that may reign in FPI selling in the short-term for now.

FPI activity in Indian markets

FPIs offloaded ₹8,671 crore in Indian equities last month and ₹10,949 crore in debt markets over high US bond yields. However, they pumped ₹35,098 crore in Indian equities during March 2024 – the highest inflows recorded in the first three months of 2024. The inflow into Indian equities stood at ₹1,539 crore in February 2024, and the debt market investment rose to ₹22,419 crore during the month on top of the ₹19,836 crore bought in January. The inclusion of government bonds to JPMorgan and Bloomberg debt indices had especially triggered foreign fund inflows into debt markets.

Conclusion

While FPIs have turned net buyers in Indian equities, the sell-off continues in the debt market. The future of FPI inflow into Indian markets will largely depend on the US Federal Reserve’s decisions and the performance of the Indian economy and markets. The absorption of FPI selling in the equity markets by DIIs, HNIs, and retail investors is a positive factor that may limit FPI selling in the short term.