After months of heavy selling, foreign
portfolio investors (FPIs) have surprised the Indian stock market by
injecting ₹11,113 crore over the past three trading days. This
unexpected move has sparked speculation about whether FPIs are reassessing
their India strategy.
FPI Activity: A Volatile Two Months
Since October 1, 2024, FPIs have withdrawn ₹155,730 crore from Indian equities, driven by global and domestic concerns. In October, outflows amounted to ₹113,858 crore, while November saw an additional ₹41,872 crore leave the market as of November 22.
However, FPIs reversed course with significant investments:
- November 25: ₹9,947 crore inflow.
- November 26: ₹1,157 crore inflow.
Market analysts remain cautious about this trend. While the inflows signal renewed interest, year-end redemptions and lingering global uncertainties may curb sustained investment momentum.
Domestic Investors Counterbalance FPI Trends
Domestic institutional investors (DIIs) have acted as a stabilizing force during the FPI sell-off, investing ₹30,042 crore in November and ₹107,254 crore in October. However, the last three trading days saw DIIs selling ₹7,516 crore worth of equities, reflecting the market's ongoing volatility.
Market Resilience Amid Contrasting Flows
Despite fluctuations in FPI and DII activity, the Sensex has displayed remarkable resilience:
- Since November 21: The index has climbed 3.98%, adding 3,079 points to close at 80,234.08.
- November 22: The Sensex soared by 1,961 points (+2.54%), closing at 79,117.11, even as FPIs pulled out ₹1,278 crore that day.
Factors Driving FPI Behavior
Several key factors have influenced FPI outflows:
- Shifting Global Preferences: The “Sell India, Buy China” trend has dominated FPI strategies, though it appears to be easing.
- Corporate Earnings Concerns: Uncertainty around FY25 earnings has spooked some investors.
- U.S. Market Dynamics: Under the new Republican administration, expectations of lower corporate taxes, stronger tariffs, and a robust dollar have made U.S. markets increasingly attractive.
What’s Next for FPIs?
Market experts predict a tapering of FPI outflows in the coming months. Moderating valuations in large-cap stocks, combined with resilience in key sectors like IT and banking, may stabilize FPI activity.
The NDA’s decisive victory in Maharashtra has added to the market's positive sentiment, further buoying confidence. However, upcoming events like corporate earnings announcements, the Union Budget, and global market trends will heavily influence FPI movements.
Global Trends and Challenges
Global factors continue to exert pressure on FPI behavior. Rising U.S. inflation, stronger economic growth, and higher interest rates could redirect capital flows away from emerging markets like India.
According to JM Financial, these dynamics highlight the increasing competition India faces in retaining FPI interest amid changing global conditions.
Conclusion
The Indian stock market remains a battleground between FPIs and DIIs, with recent FPI inflows offering a glimmer of optimism. However, external and internal factors, including year-end redemptions and policy shifts, will play a critical role in shaping the trajectory of FPI investments. For now, India’s market continues to demonstrate resilience under mounting pressures, providing hope for sustained recovery.
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