FPIs log Rs 21,789 cr inflows in Dec so far, reversing mths of withdrawals

Foreign portfolio investors (FPIs) recorded net equity inflows of Rs 21,789 crore in December so far, marking a significant reversal after months of heavy outflows. With this surge in December, FPIs have experienced a total net inflow of Rs 6,770 crore in 2024, compared to outflows of Rs 15,019 crore at the end of November.

This turnaround comes after heavy off-loading in domestic equities in the last two months, with net outflows of Rs 21,612 crore in November and Rs 94,017 crore in October.

In the first half of December, nearly 83% of FPI flows were concentrated in three sectors — financial services, IT, and real estate. These sectors attracted inflows of Rs 7,424 crore, Rs 6,754 crore, and Rs 4,689 crore, respectively. At the same time, FPIs sold Rs 5,337 crore worth of oil and gas stocks, Rs 1,823 crore of auto stocks, and Rs 1,655 crore of FMCG shares.

Despite these shifts, telecom and services, which had seen outflows in November, saw renewed interest in December, with inflows of Rs 627 crore and Rs 553 crore, respectively. Oil and gas remains the top sector for FPI outflows in 2024, with cumulative sales of Rs 50,851 crore, while financials have seen withdrawals nearing Rs 54,000 crore for the year.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented on the market volatility, and said, “the sudden change in FII strategy from buying to selling has impacted markets. In the early days of December, FIIs were consistent buyers, purchasing equity worth Rs 14,435 crore in the cash market until December 13. However, they turned into significant sellers after that, with equity sales of Rs 15,828 crore in the cash market for the week ending December 20, selling on all days.”

He noted that factors like the rising dollar index, increased U.S. 10-year bond yields, and India-specific concerns such as slowing growth and flat corporate earnings in Q2 contributed to the shift.

Vijayakumar emphasised that the strength of the US economy, solid corporate earnings growth, and a strong dollar are currently favouring U.S. markets. He believes that FIIs are likely to return as buyers when GDP and earnings growth show signs of recovery. “Q3 data could be mildly positive. Meanwhile, FII selling has depressed the prices of certain largecap segments like banking, where valuations are now attractive. This market downturn presents an opportunity for investors to buy quality large caps, particularly in sectors like pharma, IT, and digital platform companies, which may buck the downtrend,” Vijayakumar added.

FPI flows throughout 2024 have seen substantial fluctuations. September witnessed the highest monthly inflow at Rs 57,724 crore, while in August, they had purchased shares worth Rs 7,322 crore which was down month-on-month from July when the total buying figures stood at Rs 32,359 crore.

In June, FPIs were net buyers at Rs 26,565 crore after remaining net sellers in April and May when they sold equities worth Rs 8,671 crore and Rs 25,586 crore respectively. Meanwhile, in February and March they were net buyers at Rs 1,539 crore and Rs 35,098 crore, respectively, after starting the year on a negative note in January when they offloaded shares worth Rs 25,744 crore.

On Friday, FIIs were net sellers at Rs 3,597.82 crore, while Domestic Institutional Investors (DIIs) were net buyers at Rs 1,374.37 crore. Despite the volatility, December’s inflows reflect improving sentiment as global uncertainties ease and key sectors show attractive valuations.

Also read | Sensex rejig on Monday: Zomato to replace JSW Steel, $513 million inflows expected

( Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)