July sees 43,804 crores put by FPI:
The buying streak of Foreign Portfolio Investors (FPIs) continues this financial year. The Indian equity received 43,804 crore in July so far as per NSDL data. FPIs are continuing their buying streak for the fifth consecutive month. These massive inflows have led major indices SENSEX and NIFTY to touch all-time highs.
Primary beneficiaries were the sectors of automobile, FMCG, capital goods, realty, finance, etc. Foreign Institutional Investors (FIIs) invested 3,371 crore on July 20.
It would be interesting to see if the momentum continues as there are concerns about rising valuations in Indian markets. There was a sharp correction in Indian bourses on Friday as SENSEX fell 887 points. Also at this valuation, Chinese markets become much more attractive for investors.
Reasons for such strong response from FPIs this financial year
The strong macroeconomic indicators have been one of the reason for such enthusiasm by FPIs. The GDP data for last quarter was better than expected. The robust data of monthly PMI and IIP is also seen as the resilience of the Indian economy.
Stability in monetary policy and lowering of the Current Account Deficit(CAD) have also made investors bullish about Indian markets. The currency has also stayed stable for the past months, despite pausing of rate- hikes by RBI. This too went well with the investors and improved their confidence in the Indian markets.
In addition to this, corporate earnings have improved. This has led to healthier balance sheets. Corporate earnings are expected to grow at a handsome CAGR (compound annual growth rate) further. Sentiments about inflation which was a huge worry in the previous financial year too have improved. Monsoon season will lay the road ahead for inflation.
Economic Uncertainty in China and poor recent macroeconomic indicators have also favored India. The China + 1 policy has started to benefit India to some extent. Companies have started to look for alternatives to China to lower dependency.
What to expect ahead?
Starting March 2024 FPIs have invested close to 1.5 trillion rupees. As per reports, this is the highest inflow in the securities market followed by Taiwan. Taiwan saw less than $6 billion in investment in the same period.
The erratic monsoon may lead to soaring inflation of foods in the coming months. This might affect FPIs. Floods have also affected infrastructure projects obstructing the growth.Â
Fed meeting ahead is also expected to drive the market’s momentum. It would be interesting to see if Fed continues with the pause or increases its benchmark borrowing rates.
This being the season of quarterly results of companies. There are expectations of stock-specific movements too.
