There has been quite a lot of capital being moved around by the FPI/FIIs and it is interesting to see where the money is going.
India’s equity market has been a focal point for Foreign Portfolio Investment (FPI)/ Foreign Institutional Investors (FIIs) in March and April 2024, showcasing a robust influx and few outflows of funds across sectors. March month shows a complete picture as the data projects positives and April, which has been a week has started to show signs of slowing of inflows.
March Inflows
March 2024 had significant FPI inflows totalling Rs.35,098 Cr, as reported by the National Securities Depository Ltd. (NSDL). This was a stark contrast to the outflow of Rs.25,744 Cr in January 2024, followed by a modest inflow of Rs.1,539 Cr in February 2024,
The telecommunication sector saw the highest FPI inflow of Rs.7,967 Cr in March 2024, a significant increase from Rs.2,740 Cr in February. The Indian Telecom sector is expected to grow at a CAGR of 9.40% by 2029 with the spread of verticals like infrastructure equipment, White Space Spectrum, and 5G providers attracting most of the FII inflows.
The financial services sector, encompassing banking, non-banking, insurance, and asset management companies, saw the second-largest FPI inflow of Rs.6,630 Cr in March. Despite this growth, HDFC Bank Ltd. reported a decrease in FPI stake from 52.3% to 47.83% in the January-March quarter but still the S&P BSE Financial Services index registered a 1.4% increase, indicating sustained investor confidence.
In March, the FMCG sector experienced the third-highest FPI inflow of Rs.6,241 Cr but the S&P BSE FMCG index saw a slight slump of 0.34%. The month of March for FMCG concerning FIIs purchasing was a roller-coaster ride as shares worth Rs.11,180 crores in the first half, followed by a selling of nearly Rs.4,939 Cr in the latter half. The FMCG sector is expected to grow at 27.9% from 2023 to 2029.
April Turbulence
In the first week of April 2024, FPIs/FIIs exhibited caution, withdrawing Rs.325 Cr from Indian equities in anticipation of general elections. The spike in the US 10-year yield at 4.4% may affect FPI inflows into India in the short term, although the bullish Indian stock market, which continues to set records, may limit FPI selling, it is expected that the FPI will return past the general elections.
Conclusion
March saw euphoric inflows by the FPIs/FIIs spread across telecom, finance and FMCG sectors but in April we are starting to see FPIs/FIIs pull out money from the Indian equities as the general election nears. Elections are expected to bring turbulent markets are FPIs/FIIs seem to want to sit it out and re-enter once the elections are done.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.