FPIs’ monthly investments hit 3-yr high in Dec

FPIs have net invested ₹57,313 crore in Indian shares in the month through 21 December, according to depository data. This is the highest inflow in any month since they pumped in ₹62,016 crore in December 2020, the record for any month.

 

A major part of the monthly inflow went into financial services, which attracted a net investment of a whopping ₹22,891 crore in the first half of the month, according to National Securities Depository Ltd. Healthcare was their second top pick .with a net investment of ₹3,449 crore, followed by auto and auto components, which attracted ₹3,309 crore during 1-15 December.

According to market experts, the early-December election victory of the Bharatiya Janata Party (BJP) in the three Hindi heartland states of Rajasthan, Madhya Pradesh and Chhattisgarh, lifted FPI spirits, which had turned tepid in the three preceding months, on the hopes of policy continuity for another five years after the general election in May next year.

Indeed, FPIs sold shares worth ₹39,316 crore in September-October, causing the Nifty50 to fall 7% from the then record high of 20,222.45 on 15 September to a low of 18,838 on 26 October. They returned in November with a modest purchase of ₹9,001 crore, only to pump up the volumes in December.

“The turning point was the BJP win in the three states," said Nirmal Jain, founder and chairman, IIFL Group. “That gave FPIs the FOMO (fear of missing out) in case they stayed at the sidelines. With policy continuity indicated by the win, and the government’s thrust of infra and manufacturing, the Indian markets are in a sweet spot and likely to attract higher FPI flows."

Further FPI flows may not only make December the best month for monthly inflows, but could also end up making 2023 the calendar to clock the largest FPI investments.

The investment in 2023 so far stands at ₹1.62 trillion, marginally shy of the ₹1.7 trillion in 2020, the year the covid pandemic surfaced.

“This December has been unique in that FPIs have participated in over 20 QIPs (qualified institutional placements), IPOs and block deals, put together," said Nilesh Shah, MD, Kotak Mahindra AMC. “Normally, at this time of year, they sell and go away, but the lure of money has drawn them to the Indian market in a way seldom seen before during Christmas. The outlook for FPI inflows, given India’s expected GDP growth rate of 7% this fiscal, looks promising."

The FPI flows stand in contrast to the modest ₹10,109.19 crore invested by domestic institutional investors or DIIs so far this month, according to BSE provisional data. To be sure, DIIs have invested a greater ₹1.82 trillion in the calendar year so far. The combined institutional flows have driven up the Nifty by 17.32% to 21,349.40 in the calendar year to date.

FPIs’ total Indian equity assets under custody stand at $723.6 billion, as of the fortnight ended 15 December.