FPIs Pump Rs 12,170 Crore into Indian Stocks in June, Rebounding on Election Calm and Policy Optimism!

After the general election results, foreign investors (FPIs) have put in Rs 12,170 crore into Indian stocks in June. This marks a recovery from their net withdrawal of Rs 25,586 crore in May and more than Rs 8,700 crore in April, which were influenced by election uncertainty and concerns over tax treaty changes with Mauritius and rising US bond yields.

Year-to-Date Trends Show Net Outflow

Despite this recent inflow, the total outflow for the year so far stands at Rs 11,194 crore (up to June 21), according to data from depositories.

Sunil Damania, Chief Investment Officer at MojoPMS, noted that FPI investments might remain limited due to the high valuations of Indian stocks.

FPIs Waited for Election Outcomes

FPIs had held back waiting for the election results. Except for March, where they invested Rs 35,000 crore, they have generally pulled out funds in 2024.

Kislay Upadhyay, founder of FidelFolio, said that despite the election results being somewhat surprising, the market responded positively to the formation of a stable government. This boosted business sentiment and confidence in policy continuity. Damania identified three main reasons for the positive inflow: ongoing government reforms, the slowdown in China (shown by a 12% drop in copper prices), and FPIs eagerly participating in certain block deals.

However, these FPI investments have been focused on a few stocks rather than spread across the market.

The expectation of a pro-growth budget also lifted investor sentiment, according to Himanshu Srivastava of Morningstar Investment Research India.

Market Sectors

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said early trends show FPIs buying in financial services, telecom, and real estate, and selling in FMCG, IT, metals, and oil and gas sectors.

FPIs also invested Rs 10,575 crore in the debt market during the review period. Overall, FPIs have consistently invested in Indian debt this year, with a total investment of Rs 64,244 crore, except for April. India’s inclusion in the global debt index has positively impacted these inflows.

Nimesh Chandan, CIO at Bajaj Finserv Asset Management Ltd, commented that despite short-term fluctuations, India remains a promising long-term investment destination for global investors.