In a surprising shift, foreign portfolio investors (FPIs) have transitioned from avid buyers to aggressive sellers in the Indian equity market for the month of January 2024. The most recent data from the National Securities Depository Limited (NSDL) reveals FPIs offloading Bharat stocks amounting to Rs 24,734 crore this month. This marks a significant departure from their previous trend of accumulating domestic stocks during November and December.
According to a report by CARE Ratings, caution surrounding emerging markets, coupled with the increase in US yields, has prompted FPIs to exercise restraint in Bharat equities. Despite the equity outflows, FPI inflows in the debt market have remained resilient. This is attributed to Bharat’s inclusion in the JP Morgan bond index and the potential inclusion in Bloomberg EM Local Currency indices. The sustained inflows in the debt market have largely offset the impact of FPI outflows from equities.
The recent selling spree by FPIs has triggered corrections in Indian benchmark stock indices. However, the situation was markedly different in December, as FPIs enthusiastically invested in Indian stock markets, accumulating a substantial Rs 66,135 crore. To put this into perspective, the entire year witnessed an inflow of approximately Rs 171,107 crore, with over one-third of it pouring in during the month of December. This influx of foreign funds in December played a pivotal role in propelling benchmark stock indices to all-time highs.
Looking back, the NSDL data indicates a lukewarm FPI participation in Indian stocks before November, with net selling in September and October, amounting to Rs 14,768 crore and Rs 24,548 crore, respectively. In contrast, FPIs exhibited a positive trend earlier in the year, with notable purchases in March, April, May, June, July, and August, totaling Rs 7,936 crore, Rs 11,631 crore, Rs 43,838 crore, Rs 47,148 crore, Rs 46,618 crore, and Rs 12,262 crore, respectively.
The shifting dynamics of FPI activity in Bharat markets continue to be a subject of close observation, as market participants monitor the impact of global economic factors on investment patterns.
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