After nine consecutive months of continuous selling, foreign investors have become net buyers and have poured nearly Rs 5,000 crore into Indian equities in July on a soft dollar index and good corporate earnings. This is in stark contrast to the net return of Rs 50,145 crore from the stock market in June. This was the highest net outflow since March 2020, when foreign portfolio investors (FPIs) pulled Rs 61,973 crore from equities, data from depositories showed.
Going forward, Hitesh Jain, Lead Analyst – Institutional Equities, Yes Securities, believes that FPI flows will remain positive during August as the worst period seems to be over for the rupee, and that seems to be the case. That oil is limited.
“Also, the earnings story is still strong where strong revenue growth is offsetting the decline in profit margins,” he added. FPIs poured a net amount of Rs 4,989 crore into Indian equities in July, according to data from depositories. He was a shopper nine days a month.
Net inflows also pushed equity markets northward. FPIs became net buyers for the first time in July, after nine consecutive months of massive net outflows, which began in October last year. Between October 2021 and June 2022, they sold a whopping Rs 2.46 lakh crore in Indian equity markets.
The turning point for NetFlow in July was US Federal Reserve Chairman Jerome Powell’s statement that the US was not in recession, which helped improve global sentiment and risk appetite, Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said. TradeSmart chairman Vijay Singhania said strong corporate numbers also boosted inflows.
A softer dollar index and good quarterly earnings from financials have helped improve sentiment, said VK Vijaykumar, chief investment strategist at Geojit Financial Services. Additionally, the recent correction in Indian equity markets has also provided a good buying opportunity, and FPIs are taking advantage of this by hand-picking high-quality companies, Srivastava said.
However, FPIs withdrew a net amount of Rs 2,056 crore from the debt market during the month under review. According to Srivastava, this reversal in net outflows cannot be considered as a change in trend or considered that FPIs have made a full comeback. While this is a welcome change from foreign investors, the scenario continues to evolve rapidly, and clarity may take some time. “The outflows have also largely been driven by short-term trends. So, we still see long-term money flowing into Indian markets, which are more stable. Also, fears of the US going into recession remain. Any aggressive rate hike by the US Fed, or the prospect of one, could further fuel capital outflows in emerging markets like India.”
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