FPI buying hits 10-month high of Rs 47,148 crore in June; markets rise to record high

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FPI buying hits 10-month high of Rs 47,148 crore in June; markets rise to record high*

Amid improvement in macroeconomic fundamentals, June emerged as the best month with strong foreign portfolio investors (FPIs) inflows in the last 10 months. The FPIs pumped in Rs 47,148 crore in Indian equities in June. This would also be the fourth consecutive month where FPIs have continued to end as net buyers in domestic stocks.

"Sustained FPI flows triggered by India's steadily improving macros have taken markets to record highs. The major reason for the sustained FPI flows into India is the reversal in FPI strategy," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Meanwhile, FPIs' investment stood at Rs 43,838 crore in May, Rs 11,631 crore in April, and Rs 7,936 crore in March. However, FPIs pulled out Rs 5,294 crore in February and Rs 28,852 crore in January. In the first half of 2023, they have pumped Rs 76,407 crore.

"January and February 2023 saw massive flows to China triggered by China's opening up after Covid and expectations of a revival in growth and earnings. The FPI strategy was 'Sell India, Buy China'," Vijayakumar said.

"FPI investment in India in January and February combined was negative Rs 34146 crores. This strategy was based on the view that China is cheap and India is expensive. This strategy proved to be a mistake since the prospects of China deteriorated, and that of India improved. The Chinese economy is struggling and growth is expected to be muted for many years to come," Vijayakumar added.

In the first half of 2023, S&P BSE benchmark Sensex jumped 3,913 points or 6.43% to end at 64,753. The broader NSE Nifty surged 1,084 points or 5.98% higher to end at 19,189.

Meanwhile, oil prices also tanked and remained below $75 a barrel in June and were on course for a fourth consecutive quarter of losses amid concerns over sluggish global economic activity and fuel demand.

"India's macros are steadily improving, and GDP and corporate earnings growth have the potential to improve further from here. So FPIs have reversed their strategy to 'Buy India, Sell China'. FPIs have invested Rs 47,148 crores in June on top of the Rs 43,838 crores in May," he said.

Vijayakumar further suggested, "FPI money is chasing performance and prospects. FPIs continued to invest in financials, automobiles, capital goods, and construction-related stocks."

Going ahead, Vijayakumar said, "Valuations in India are rich, from a short-term perspective. Therefore, even while continuing to invest in India, FPIs are likely to turn a bit cautious, going forward."