FPIs invest Rs 37,316 crore in May on strong domestic macro fundamentals, reasonable valuation

New Delhi: Foreign Portfolio Investors (FPIs) have pumped Rs 37,316 crore in Indian equities in May so far, primarily due to strong macroeconomic fundamentals and reasonable valuation of stocks.

This is the highest investment by FPIs in the last six months. Before this, they made a net investment of Rs 36,239 crore in equities in November 2022, data available with the depositories showed.

Going forward, a resolution on the US debt ceiling and good domestic macro-economic data could prove to be positive for the markets and may lead to fresh flows of assets from foreign investors, Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said.

The outlook for FPI flows has significantly improved, primarily due to the completion of the quantitative tightening cycle in the US and India's recent outperformance in comparison to global equities, Shrey Jain, founder and CEO of SAS Online, said.

According to data from the depositories, FPIs invested a net sum of Rs 37,317 crore in Indian equities during May 2-26.

This came following a net infusion of Rs 11,630 crore in equities in April and Rs 7,936 crore in March. The March investment was mainly driven by bulk investment in the Adani Group companies by the US-based GQG Partners. However, if one adjusts for the investments of GQG in Adani Group, the net flow was negative.

Moreover, in the first two months this year, FPIs had pulled out over Rs 34,000 crore.

Srivastava said that the latest net inflows are largely driven by the strong domestic macro-outlook, reasonable valuation of Indian equities, and a good earning season, signifying better growth prospects.

"Encouraging trajectory of inflation, pause stance of RBI (Reserve Bank of India), healthy growth prospects of India in an otherwise recessionary global scenario, reasonable valuations of the equity market and resilient and strong performance of most industries in the current result season, have led to an optimistic outlook for FPI in Indian equity markets," Nitasha Shankar, Head – PRS Equity Research at YES Securities, said.

The sustained buying by FPIs has lifted the NSE benchmark index Nifty by 2.4 per cent in May so far, and the upward momentum is expected to continue.

Apart from equities, FPIs have invested Rs 1,432 crore in the debt market so far in May.

With the latest inflow, net investment by FPIs in Indian equities reached Rs 22,737 crore in 2023 so far.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that India is among the best-performing markets like Japan, Taiwan, South Korea and Brazil, while other markets, developed and emerging, are struggling.

In terms of sectors, FPIs have been buyers across sectors, such as automobiles, capital goods, healthcare, oil and gas, and telecom. Moreover, massive buying was witnessed in financial services, particularly banking.