Foreign Portfolio Investors (FPIs) have adopted a cautious approach, exhibiting a tempered investment strategy by infusing approximately INR 3,900 crore into Indian equities during the initial two weeks of January. This measured investment stance comes against the backdrop of heightened uncertainty surrounding the interest rate scenario globally.
Comparatively, this marks a slowdown from the substantial INR 66,134 crore garnered throughout December. In the preceding month of November, FPIs displayed a more robust investment sentiment, contributing INR 9,000 crore.
Data sourced from depositories indicates that foreign investors made a net investment of INR 3,864 crore in Indian equities within the first half of January 2024, specifically until January 12.
Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Adviser India, suggests that this cautious investment pattern can be attributed to investors opting to secure profits as the Indian equity market hovers near its historical peak. Additionally, the prevailing uncertainty regarding the global interest rate outlook may have led investors to adopt a wait-and-see approach, seeking more definitive cues before making substantial investment decisions in emerging markets like India.
Srivastava also points out that persistent geopolitical conflicts remain a notable risk factor influencing foreign investors’ decisions, further contributing to their cautious stance.
In contrast, FPIs continue to exhibit confidence in the debt market, injecting INR 7,912 crore during the reviewed period. This follows a net investment of INR 18,302 crore in December, INR 14,860 crore in November, and INR 6,381 crore in October.
The announcement made by JP Morgan Chase & Co. in September, indicating the inclusion of Indian government bonds in its benchmark emerging market index from June next year, has played a pivotal role in influencing inflows into the country’s bond markets in recent months.
Reflecting on the broader picture, the total FPI flows in 2023 amounted to INR 1.71 trillion in equities and INR 68,663 crore in the debt markets. Collectively, these investments infused a substantial INR 2.4 trillion into the Indian capital market.
This positive flow into Indian equities follows the worst net outflow of INR 1.21 trillion in 2022, primarily triggered by aggressive rate hikes implemented by central banks globally. Before this outflow, FPIs consistently invested in the Indian market over the preceding three years.