Foreign Portfolio Investors (FPIs) have started buying Indian shares again in June, reversing their selling trend from the previous two months. Up to June 21, FPIs bought Indian equities worth Rs 12,170 crore.
Shift from Selling to Buying
This is a significant change from their net selling position in the first half of June when they sold Rs 14,794 crore worth of stocks, and narrowed their sales to Rs 3,064 crore in the second week.
Despite this recent buying spree, FPIs remain net sellers for the year, having sold a total of Rs 11,194 crore worth of equities in 2024. Breaking down the data from January, FPIs were net sellers in January, April, and May, selling Rs 25,744 crore, Rs 8,671 crore, and Rs 25,586 crore worth of shares respectively. They were net buyers in February and March, purchasing Rs 1,539 crore and Rs 35,098 crore of equities during these months.
Recent Market Trends
On June 21, Indian markets closed lower, breaking a six-day winning streak. This decline was due to foreign institutional investors (FIIs) selling stocks worth Rs 1,790.19 crore. However, domestic institutional investors (DIIs) bought shares worth Rs 1,237.21 crore. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that FPIs find Indian stock valuations very high, leading them to invest in cheaper markets like China, where stocks have become more attractive.
Market Rebounds
The markets have recovered well since June 4, 2024, after the election results, which initially caused a sharp drop. Since the election outcome, the Nifty index has risen by 1,617 points or 7.4%, from 21,884.50 to 23,501.10 by June 21, hitting a new high of 23,664 along the way.
Sunil Damania, Chief Investment Officer at MojoPMS, mentioned that FPIs have changed their investment stance post-election, injecting Rs 23,786 crore into the market since June 10. He attributed this positive shift to three main factors: the continuation of the government promising ongoing reforms, a slowing Chinese economy, and FPIs eagerly participating in certain market deals. However, he cautioned that the high valuations of Indian stocks mean these FPI inflows are focused on a few select stocks rather than being spread across the market or different sectors.
Overall, while FPIs have resumed buying Indian equities, the high market valuations might limit broader FPI inflows going forward.
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