FPIs net buyers of $1.4 billion in five sessions: Election jitters behind us?

While they have been net buyers in the last five trading sessions, FPIs are still net sellers in the current month at $624 million.

The relentless selling by foreign investors over election outcome seems to have paused for now, with FPIs turning net buyers of shares worth $1.4 billion in last five trading sessions, data showed.

This is in sharp contrast to the intense selling seen in the last couple of months, as captured by data from NSDL, which shows foreign investors were net sellers of $1.1 billion worth of equities in April, intensifying it to $3.02 billion in the month of May.

While FPIs have been net buyers in the last five trading sessions, they still are net sellers for the month at $624 million.

In the current calendar year till date, FPIs have sold shares worth $3.39 billion – with only the month of March seeing a net buy figure from foreign investors, lapping up shares worth $4.02 billion. In CY23, FPIs were net buyers at nearly $21 billion.

Analysts attribute the recent buying spree to the clarity on the political front as BJP-led NDA has returned to power again with the assurance of continuity of key policies.

FPIs were mostly selling ahead of the elections, on concerns that the BJP might secure fewer seats than in 2019. However, signs of policy continuity under NDA 3.0 appears to have played a role in reassuring FPIs, analysts told Moneycontrol.

FPI action have been quite volatile as strong inflows last year were driven by expectations of a US Fed rate cut and India's bond index inclusion, though recent months had seen heightened selling pressure.

Going ahead, analysts are split on whether the buying will continue, as a section of market participants believe it is too early to predict whether there has been a change in their strategy.

Many believe that future buying hinges on policy announcements and India's appeal compared to other emerging markets.

Siddarth Bhamre, Head of Research at Asit C Mehta Investment Intermediates said that in the recent months, concerns over government formation and a delayed rate cut by the US Federal Reserve had fuelled FPIs’ selling activity. Now, with the election-related uncertainty behind us, any major selling by FPIs is unlikely, Bhamre adds, however, do not expect aggressive buying since much of the optimism is already priced in.

Gaurang Shah, Senior Vice-President at Geojit Financial Services, believes that FPI action is now largely sentimental for the Indian markets, given the growing importance of domestic flows that have pushed the benchmarks to record highs. Shah believes India's robust fundamentals -- GDP growth, interest rates, corporate earnings stability, and attractive returns – are strong reasons for FPIs to buy Indian shares and increase their investments over time, despite the caution ahead of elections.

In the current month till date (June 14), the benchmark Sensex and Nifty have surged over 4.2 percent each, with BSE Midcap and BSE SmallCap indices rising 7.6 percent and 9 percent, respectively.

In 2023, Sensex and Nifty registered gains of 18.7 percent and 20 percent, respectively, while BSE Midcap and BSE Smallcap soared 45.5 percent and 47.5 percent, respectively.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before making any investment decisions.