“Since the markets have rallied smartly during the last three months, some profit booking by FPIs would be rational and can be expected, “VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
With the global economic mood getting challenging due to slackening Chinese demand, any weakness in global equities could trigger wild gyrations in local shares and result in FPI flow turning choppy going ahead, Srikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, said.
According to the data with the depositories, Foreign Portfolio Investors (FPIs) have put in a net sum of Rs 3,272 crore in Indian equities from August 1-11.
However, in the first week of August, FPIs took a breather and pulled out over Rs 2,000 crore from equities.
“The uncertainty in the global markets and economic concerns in China again played a role in FPIs shifting their focus back toward Indian markets, which have been more resilient and stable,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said.
Also, better-than-expected earnings season for the June quarter lent positive support to the sentiments, he added.
“Despite stocks trading at higher levels, the June quarter results have led to a reduction in the market’s Price-to-Earnings (PE) ratio. This favorable PE ratio, backed by strong corporate performance, provides valuation comfort to FPIs,” Mayank Mehraa, small case manager and principal partner at Craving Alpha, said.
Additionally, the relative stability in the Indian Treasury rates, in contrast to the volatility observed in the US 10-year rates, enhances India’s appeal for FPIs, he added.
Before August, Indian equities witnessed an unabated net inflow in the past five months from March to July on the resilience of the Indian economy amid an uncertain global macro backdrop. Moreover, FPIs invested over Rs 40,000 crore each in the last three months (May, June, and July).
The net inflow was Rs 46,618 crore in July, Rs 47,148 crore in June, and Rs 43,838 crore in May. Before March, overseas investors pulled out Rs 34,626 crore collectively in January and February.
Apart from equities, FPIs invested Rs 2,860 crore in the debt market during the period under review.
With this, inflow in the equity market reached Rs 1.26 lakh crore, and the same for debt was at Rs 23,300 crore so far this year, data with the depositories showed.
In terms of sectors, FPIs continued to be buyers in financials, capital goods, and also in IT selectively. A significant trend in the market is that FPI selling is countered by strong domestic institutional investors (DIIs) buying.