FPIs made a comeback in December, injecting Rs 24,454 crore into Indian equities. Has the sale ended?

Foreign portfolio investors (FPIs) took a sharp turn in the first week of December, turning into net buyers, ending a strong sell-off that had continued for two consecutive months on the back of global cues. D Street experts believe that trend reversal is a clear strategy for foreign investors to bank on year-end gains in the Indian stock market.

FPIs were net sellers in the Indian market last month while the US market and US bond yields were on the rise following Republican Donald Trump’s victory in the US presidential election and the US Federal Reserve’s decision to cut interest rates. It became. However, the US Federal Reserve has made clear that there is no need to rush to cut interest rates.

The decline in FPIs hit a record high in October due to continued geopolitical tensions in the Middle East and weak valuations in the Chinese stock market. The FPI outflow recorded in October 2024 was the highest ever for a single month in the Indian market. FPI outflows in October hit the highest level in 10 months, marking the largest year-to-date (year-to-date) decline in the Indian market.

FPI ends 2-month consecutive sales record

According to data from National Securities Depository Ltd (NSDL), FPIs INRThis month saw inflows of Indian stocks worth 24.454 billion, with net inflows of INR3,477.2 billion as of December 6, considering debt, hybrid, debt VRR, and equity. The total amount of debt investment is INR355 million so far this month.

“From December to 6th, FIIs turned buyers and bought shares. INR17.921 billion through exchanges. The total FII purchases up to December 6, including purchases through the primary market, are as follows: INR24,453 crore,” said Dr VK Vijayakumar, chief investment strategist, Geojit Financial Services.

Has the FPI decline finally ended?

According to Dr VK Vijayakumar, the reversal of the current trend is a clear change in India’s FII strategy. “It can be said that FII’s relentless selling phase is over,” a market expert said. “FIIs turning buyers in early December completely reversed the sustained sales strategy of the past two months and changed market sentiment.”

It was sold by a foreign institutional investor (FII) in October. INR1,13,858 crore through exchanges. The amount decreased in November INR39,315 billion. Experts say FIIs’ change in strategy is reflected in stock price movements, especially in large bank stocks, where FIIs were sellers.

“This segment is well-valued and growing reasonably well, so there is scope for further expansion. Domestic institutional and individual investor funds are likely to flow further into this space. Information Technology (IT) is also performing well and is a sector likely to attract more FII purchases,” added Dr. VK Vijayakumar.

FII sales in November were lower than in October, which may be partially due to lower valuations due to market corrections. However, market analysts pointed out that despite the decline in equities, the trend of FII purchases through the primary market continued in November.

FIIs bought the shares in November INR17.74 billion through the primary market. “Taking the period up to November 29, 2024, the total FII sales for the year would be: INR1,1862 billion. During this period, FIIs purchased shares. INR1,036.01 billion through the primary market. The reason this dichotomy exists is because of high valuations in the secondary market and reasonable valuations in the secondary market,” said an analyst at Geojit Financial Services.

Disclaimer: The views and recommendations provided in this analysis are those of the individual analysts or brokerage firms and not of Mint. Because market conditions can change rapidly and individual circumstances may vary, investors are strongly encouraged to consult a certified professional before making any investment decisions.