Foreign Investors Infuse ₹1,209 Crore in Indian Equities This Week; June Net Outflow at ₹4,192 Crore: NSDL

Weekly Rebound in FPI Activity

Foreign investors have infused ₹1,209 crore into Indian equities this week, marking a positive shift in sentiment amid a volatile market environment. However, the net outflow for the month of June still stands at ₹4,192 crore, according to data released by the National Securities Depository Limited (NSDL) as of June 21.

This rebound in foreign flows is being seen as a temporary but encouraging sign of renewed investor confidence following a prolonged stretch of capital withdrawal earlier this month, which coincided with heightened geopolitical tensions, U.S. interest rate uncertainty, and pre-election jitters in India.

Mixed Bag Across Asset Classes

While the equity segment witnessed inflows this week, debt markets and hybrid instruments continued to see moderate outflows, underlining the cautious approach of global investors. So far in June, foreign investors have pulled out ₹2,744 crore from the debt segment and ₹1,179 crore from hybrid securities.

Conversely, equity inflows this week are being attributed to India’s improving macroeconomic data, lower inflation figures, and the post-election clarity that emerged following the formation of the new coalition government under Prime Minister Narendra Modi.

Analysts Weigh In: Signs of Confidence, but Risks Linger

Market experts suggest that while the weekly inflow is a positive signal, the overall foreign fund sentiment remains fragile.

“The ₹1,209 crore inflow this week indicates that investors are regaining some comfort with Indian equities post-election,” said Ajay Bagga, independent market analyst. “However, headwinds like global rate uncertainty, oil prices, and geopolitical risks may keep FPIs cautious in the near term.”

Similarly, Bhavin Mehta, Fund Manager at Dolat Capital, remarked, “FPIs are taking a bottom-up approach. They're selectively buying into sectors like capital goods, industrials, and financials where earnings visibility is strong. But the broader trend remains volatile.”

Sectors Attracting FPI Attention

Recent FPI buying was particularly visible in banking and capital goods sectors, where valuations had corrected earlier due to sustained selling. Private sector banks, in particular, have emerged as favorites, with strong quarterly earnings and stable asset quality acting as catalysts.

The Information Technology (IT) sector, however, remains under watch due to mixed earnings guidance and lingering concerns over U.S. tech spending, a major revenue contributor.

Meanwhile, real estate and auto stocks have also seen selective FPI interest, as domestic consumption and infrastructure investment expectations remain strong.

Market Context: Stable Macro But Global Cues Key

India’s macroeconomic indicators continue to show resilience. Retail inflation eased to a 12-month low of 4.75% in May, while the Reserve Bank of India (RBI) has kept its growth forecast unchanged at 7.2% for FY25.

Despite this positive backdrop, the Indian market has been subjected to intermittent volatility due to foreign capital flight, dollar strength, and concerns over Fed rate cuts being delayed.

“The interplay between U.S. bond yields and FPI flows into India remains tight,” said Rohit Arora, Chief Investment Strategist at Amar Securities. “Unless global yields stabilize, we may continue to see FPI flows swing week to week.”

FPI Trends in 2024: From Euphoria to Correction

After a robust 2023 and early 2024, FPI flows into Indian equities took a sharp turn in May and early June due to political uncertainty ahead of the Lok Sabha elections.

Between January and May 2024, FPIs had infused over ₹1.3 lakh crore in Indian equities, largely driven by India's strong economic outlook and inclusion in global bond indices. However, profit booking, risk aversion, and international headwinds led to outflows in recent weeks.

Now that political uncertainty has reduced and India continues to report healthy economic indicators, analysts believe FPI behavior could become more constructive in the second half of the year—though not without occasional pullbacks.

Investor Outlook: Cautious Optimism

Looking ahead, market participants expect FPI flows to stabilize as the new government starts outlining its policy roadmap in the upcoming Union Budget and investor confidence returns.

“With earnings season around the corner and the Budget expected in July, we believe FPIs will adopt a ‘wait-and-watch’ stance, but remain optimistic about long-term India growth,” said Neha Chaudhary, Equity Strategist at JM Financial.

Short-term volatility may persist, especially with global developments like U.S. Federal Reserve decisions and geopolitical tensions. But India’s demographic dividend, policy continuity, and structural reforms remain attractive for long-term investors.

The infusion of ₹1,209 crore in Indian equities by FPIs this week is a sign of tentative recovery in foreign investor sentiment. However, with the net outflow for June still at ₹4,192 crore, the trajectory ahead will largely depend on global cues, domestic policy clarity, and macroeconomic stability.

While risks remain, the medium-term outlook for FPI participation in Indian equities remains optimistic—anchored by India’s robust fundamentals and increasing weightage in global portfolios.