Bulge-bracket Foreign Portfolio Investors continue to pump prime Indian equity markets in the first week of January, contrary to empirical data processed over the last few years. FPIs have invested Rs 4,773 crore into Indian equities, as per NSDL data.

This comes on the back of a fast and furious December where FPIs invested large dollops of dollars. In December, domestic equity markets experienced a surge fueled by substantial inflows from foreign portfolio investors (FPIs), who infused an impressive Rs 66,134 crore during the month. The Nifty concluded the preceding month with a nearly 8 per cent increase.

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The upsurge in the market in December coincided with strong liquidity from FPI inflows during the month which stood at Rs 58,372 crore.

Including the investment through the primary market and others, the December FPI inflows stood at Rs 66,134 crore. The last two months of 2023 has witnessed big investment by FPIs thanks to the sharp decline in US bond yields and declining dollar. FPI inflows which were negative in the 3 months before December have sharply turned positive in December.

The total FPI flows for 2023 stood at Rs 171,106 crore.

“In December, FPIs were big buyers in financial services and also in IT. FPIs also bought in sectors like autos, capital goods, oil and gas and telecom,” said V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

In December, Foreign Portfolio Investors (FPIs) exhibited significant interest in financial services and information technology sectors. Additionally, they diversified their investments across sectors such as automobiles, capital goods, oil & gas, and telecom, as highlighted by Vijaykumar.

Explaining the noteworthy investment trend in the final two months of 2023, the Geojit analyst attributed it to a substantial decline in US bond yields and a weakened dollar. He pointed out that FPI inflows, which had been negative in the three months leading up to December, experienced a remarkable shift to positive territory in the last month.

According to StockEdge, foreign portfolio investors made net purchases of Indian equities, encompassing both primary and secondary markets, amounting to Rs 1.77 lakh crore in 2023. This marked the highest-ever inflow from FPIs in history, in terms of the Indian rupee.

Since 2024 is expected to witness further declines in US interest rates, FPIs are likely to increase their purchases in 2024 too, particularly in the early months of 2024 in the run up to the general elections.

FPI inflows into debt will also see acceleration in 2024. “FPI inflows can help accelerate the uptrend in the main benchmark indices since the bulk of the FPI flows will be into large caps,” Vijaykumar added.

In December alone, nearly a third of the total inflows was recorded, marking the highest monthly influx in 2023. Anticipated is a surge in foreign portfolio investment (FPI) inflows into debt instruments throughout 2024.