Foreign portfolio investors (FPIs) opted for the exit route for the second straight session on Thursday, withdrawing $1.19 billion (Rs 9,901 crore) from the equities, according to provisional data with the exchanges. On Wednesday, they had pulled out a net $1.27 billion (Rs 10,578 crore) in the highest-ever single-day net selling.
Following the $2.4-billion rout in just two sessions, net flows by FPIs stand at (-) $1.91 billion for the 14 trading sessions in January.
Market participants say the US Fed’s hawkish stance, coupled with the rising tensions in the Middle East, led to a reversal in trend.
“The Fed’s indication of rate cuts happening at a pace lower than expected, coupled with the tensions in the West Asia, created panic. The Nifty’s support is at 21,400, and any fall below 21,200 would have led to a further bloodbath,” said market expert Ambareesh Baliga.
“What’s important is that small-caps and mid-caps haven’t lost too heavily, which shows that retail and HNIs continue to remain bullish and buy, even when institutional investors are pulling out,” Baliga said.
In the first fortnight of January 2023, FPIs had pulled out a net $1.5 billion (Rs 12,263 crore). While they were net sellers for the first two months, there was a late surge by foreign investors in the second half of the year.
While global cues will determine the direction of flows, the fundamentals of the Indian markets remain robust, and foreign investors wouldn’t want to miss the opportunity, analysts said.
“Strong domestic and FPI flows into Indian equities boosted domestic stocks in 2023. We see no reason for this to change. The macro environment seems favourable, with inflation easing. In terms of underlying fundamentals, India has seen double-digit earnings growth with minimal consensus downgrades in recent quarters,” said BNP Paribas head of India equity research Kunal Vora in the India Strategy Report 2024.
The BJP winning the recent state elections in the Hindi heartland is also a positive, indicating political stability at the Centre in 2024. Analysts said the likelihood of policy continuity will attract FPIs, who otherwise hit the pause button in the run-up to general elections.