Foreign investors made a strong comeback with a net inflow of Rs 11,730 crore (USD 1.4 billion) in the week ending July 14, driven by positive signals from domestic and global markets.
The net inflow was in stark contrast to the net outflow of Rs 14,794 crore (USD 1.77 billion) witnessed in the preceding week from June 3-7, data with the depositories showed.
With the latest flow, net outflow stood at Rs 3,064 crore in the month so far till June 14.
"After the roller coaster ride in the market in the first week of June, stability has returned to the market as indicated by the sharp fall in India VIX from 27 on June 4 to 12.82 on June 14. This fall in India VIX indicates the return of stability and a likely consolidation phase in the market," VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
Although in a coalition, the formation of the NDA government at the Centre for the third straight term fanned expectation of a continuation of policy reforms and economic growth, Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said.
On the global front, lower-than-expected inflation numbers in the US also raised hopes of one rate cut this year.
This also triggered a fall in the US treasury yield. These factors led to risk-taking sentiments among investors, resulting in increased flows into markets like India, Srivastava added.
In May, FPIs pulled out Rs 25,586 crore from equities on poll jitters and withdrew more than Rs 8,700 crore in April on concerns over a tweak in India's tax treaty with Mauritius and a sustained rise in US bond yields.
Before that, FPIs made a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, while they took out Rs 25,743 crore in January.
The resilience of the market and the eagerness of retail investors to buy every dip in the market will force FPIs to reduce their selling.
However, if the market continues to rally, FPIs may again turn sellers in India and buyers in other markets like Hong Kong, which are very cheap compared to India, Geojit's Vijayakumar said.
On the other hand, FPIs invested over Rs 5,700 crore in the debt market so far this month (till June 14).
Market experts believe that the long-term outlook for FPI flows into Indian debt is positive due to India's inclusion in global bond indices. However, near-term flows are being impacted by global macroeconomic uncertainty and volatility.
Overall, FPIs withdrew a net amount of Rs 26,428 crore from equities in 2024 so far. However, they invested Rs 59,373 crore in the debt market.
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