FPIs inflows record $7 billion in December

The FPIs [Foreign Portfolio Investors] has made a huge rebound with almost doubling of Indian equities, in December 2023, surging a record of $7 billion. This has been counted as the highest monthly net investment flow in Indian equities in the last three years.

The net FPIs in November 2023, were made about Rs9,000 crore in the cash segment. Both September and October this year saw net FPI outflows from equities at Rs14,768 core and Rs24,548 crore. The total inflow has been envisaged at $21 billion till the end of the year. This inflow is strongly intensified amid strong global cues after the US Federal Reserve has raised the expectations for further rates cuts in next half year. This facilitates foreign fund inflows into emerging markets like India.

According to National Securities Depository Ltd data, FPIs have bought around Rs57,313 crore worth of Indian equities with standing total amount at Rs77,388 crore as of December 22.

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The inflows which were seen as negative in the last three months have taken U-turn positive in December. The total FPI includes the buying through stock exchange and primary market. The continous decline in US bond yields has caused a strategic change in FPIs investments.The approximate selling of FPIs through exchange stands at Rs83,422 crore till November. The net FPI inflows into Indian equities for the respective month stood at Rs9,000 crore, taking into account debt, hybrid, debt-VRR, and equities. 

The main reason behind FPI reverse selling streak is the recently held US Federal Reserve meeting which sustained the interest rate cuts for the ongoing year at 5.25 percent - 5.50 percent. Besides, the Indian economy grew 7.6 percent during the July-September quarter for fiscal 2023-24, gaining additional momentum in the economical growth.

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The FPI inflows likely to grow at good pace with almost 40-50 percent of investments from fast growing economies. The huge investments are done in segments like IT, telecom, automobiles and capital goods. In addition, to this US Fed's dovish stance and rate cuts in the next half year. 

The primary benefits of FPI are Portfolio diversification, International credit, Access to markets with different risk-return characteristics , Increases the liquidity of domestic capital markets and Promotes the development of equity market.

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