Buoyed by the expectation and clarity of the US Federal Reserve’s rate cut decision, foreign portfolio investors (FPI) bought shares (net purchase) worth Rs 57,359 crore so far in September.
This is the highest monthly purchase by FPIs in the calendar year 2024 and accounts for more than 57 per cent of the total annual net inflow. FPIs, so far in CY24, have injected a little over Rs 1 lakh crore into Indian equities.
This monthly inflow is also the highest post-December 2023 when FPIs purchased shares worth Rs 66,135 crore, according to the National Securities Depository Limited (NSDL) data.
The US Fed's 50 basis points rate cut announced on September 18, which also marked the beginning of a rate-cutting cycle, sparked the recent buying spree by the FPIs.
In the single session of September 20, FPI purchases in the cash market stood at 14,064 crore, a three-year high figure.
“The recent surge in FPI inflows is mainly post US Fed rate decision and clarity on the rate cuts path by the fed for the remaining year. The FIIs were lagging behind the domestic flows during the year wherein we saw markets gaining more strength slowly,” said Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers.
The rate cuts led to a steady decline in bond yields in the US, prompting FIIs to invest in emerging markets such as India. This has also helped push the equity benchmarks - NSE Nifty and BSE Sensex - to fresh peaks.
“This coupled with stable and strong domestic macros added to the attractiveness of India as one of the preferred destinations. So as soon as the global liquidity situation improved FII came back strongly. Also, the recent stimulus reports from China to uplift its economy added to the positive momentum,” added Solanki.
Vinit Bolinjkar, Head of Research- Ventura Securities, said, “FPIs continued their inflows during the first four days of the current week, investing Rs 15,122 crore, buoyed by the recent Fed rate cut. Similarly, DIIs infused Rs 18,480 crore this month until September 26, with Rs 9,075 crore contributed in the first four days of this week.”
Bolinjkar added that despite a six-day positive rally, the Nifty closed in the red on Friday, indicating signs of weakness. He expects the Nifty to trade sideways or potentially see further declines, driven by profit booking resulting from the high valuations of Indian equities.
So far in CY24, FPIs have been net sellers in January, April and May. They made a big comeback in June and July after election-related concerns subsided and Indian markets saw another phase of a bull run.