FPIs infuse Rs 12,000 cr in Indian equities in September on hopes of slow rate hikes

Overseas investors have poured Rs 12,000 crore into Indian stocks so far this month on hopes that global central banks, especially the Federal Reserve, may slow the pace of interest rate hikes as inflation starts to cool. This follows a staggering Rs 51,200 crore of net investments in August and nearly Rs 5,000 crore in July, custodial figures show.

After nine consecutive months of massive net outflows that began last October, FPIs turned net buyers in July. Between October 2021 and June 2022, they sold a whopping Rs 2.46 crore in Indian equities. Shrikant Chouhan, head of equity research (retail) at Kotak Securities, said FPI flows are expected to remain volatile in the near term amid headwinds related to monetary tightening, rising inflation, geopolitical concerns and more.

According to the custodian, FPIs (foreign portfolio investors) injected a net Rs 12,084 crore into Indian equities from September 1 to 16.
Despite unfavorable global and domestic data as major economies report higher inflation, they are still net buyers looking to maintain momentum, Chouhan said.

“Foreign investors continue to invest in Indian equities on expectations that global central banks, especially the Fed, may slow the pace of rate hikes as inflation cools,” said Himanshu Srivastava, associate director and manager research at Morningstar India. Given that Indian equities will be an attractive investment target as inflation cools and the economy enters a growth trajectory, FPIs would rather stay invested than miss the opportunity, he added.

In addition, Indian equities have undergone a period of correction, making their valuations relatively attractive. This gives them a good buying opportunity to choose a quality company. Sustained FPI buying, which started in July, gained momentum in August and continued into September, supporting the recent rebound in the Indian market. However, they turned to sellers in the final days of the month amid fears of a global economic slowdown. VK Vijayakumar, chief investment strategist at Geojit Financial Services, said FPIs may wait and see until India resumes buying.

Morningstar India’s Srivastava said the latest U.S. CPI data disrupted a slowing inflation trend, dashing hopes that the Federal Reserve might pause rate hikes after September. Inflation in the United States rose 0.1% to 8 in August.
3%. Compared with the same period last year, it decreased by 8.5%.

Apart from equities, FPIs added Rs 1,777 crore in net income to the bond market this month. Like India, Indonesia and the Philippines saw inflows during this period, while Taiwan, South Korea and Thailand saw divestments.

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