Foreign investors have poured Rs 7,200 crore into Indian stocks so far this month, mainly driven by the massive investment in Adani group companies by US-based GQG Partners.
Going forward, FPIs are likely to be cautious in the near term as there is a sense of risk-off in equity markets globally due to stress in the US banking system and collapse in banking stocks, VK Vijayakumar, chief investment strategist at Geojit Financial Services, said.
The strain in the US banking system was evident after the collapse of Silicon Valley Bank and Signature Bank earlier this month.
Most global equity markets experienced a sharp rebound, though overall sentiment remained volatile as weaknesses in European and US banks came into focus.
“On the economic front, the US Federal Reserve raised Fed Fund interest rates by 25 basis points while expressing confidence in the stability of the US financial system. The inflow of foreign investment indicators is expected to remain volatile given the central bank’s tightening monetary policy,” Shrikant Chauhan, Head of Equity Research (Retail), Kotak Securities Ltd.
As per depositors’ statements, Foreign Portfolio Investors (FPIs) have invested Rs 7,233 crore in Indian stocks till March 25.
This followed a net inflow of ₹5,294 crore in February and ₹28,852 crore in January. Prior to this, data showed, FPIs injected a net worth of Rs 11,119 crore in December.
Vijayakumar said the flow in March includes the huge investment of Rs 15,446 crore by GQG in the four Adani shares.
Barring that, equity FDI activity is a strong undercurrent selling current.
In calendar year 2023, foreign investment institutions sold shares worth Rs.26,913 crore.
On the other hand, FPIs withdrew Rs. 313 crore from the debt markets during the period under review.
In terms of sectors, PE firms were buyers in automobiles and components, financial services, metals, and mining and energy. However, they sold heavily in IT stocks.
Vijayakumar of Geojit said the inflows into India would mainly target sectors facing the local economy such as banking, capital goods and automobiles.
He added that there is likely to be a conflicting trend in favor of information technology and pharmaceuticals in the near term as the valuations of these sectors have become attractive after the recent corrections.
During the month, FPIs were sellers in most emerging markets except for China, which is still seeing inflows due to trade opening up.
India and Indonesia also saw inflows during the month under review, while the Philippines, South Korea, Taiwan and Thailand saw net withdrawals.