The Indian stock market emerges as a beacon of opportunity, captivating the confidence of FPIs. What does it mean for the markets?
Once again, the Indian stock market is witnessing a remarkable surge in Foreign Portfolio Investment (FPI), which has the potential to unlock tremendous economic opportunities for the country. It is an investment made by foreign investors into international securities like stocks, bonds, and other financial assets.
Foreign investors are becoming increasingly captivated by the Indian stock market and for good reason. The nation’s robust economic outlook and the stellar quarterly performance of its companies are proving to be an irresistible magnet for international investors.
This positive trend may also be attributed to the possibility of the US Federal Reserve’s rate hike reaching its peak, as inflation numbers are gradually subsiding, creating a more favourable environment for FPI inflows.
Indian equity markets have once again caught the attention of FPIs, with a significant investment of over Rs 23,152 crore in the first two weeks of May. This marks a notable shift from the previous three months, where FPIs were consistently selling in India. Now, India has reclaimed its position as the preferred emerging market for FPIs.
In a promising trend, FPIs have remained consistent buyers over the past 12 trading sessions (till 12th May 2023), as reported by the Times of India. Their equity purchases during this period amounted to a substantial Rs 18,617 crore.
Among other sectors, finance continues to reign as the top preference for FPIs. Additionally, FPIs have also shown interest in capital goods and auto stocks.
Looking back, FPIs injected Rs 11,630 crore into Indian stocks in April and Rs 7,936 crore in March. Furthermore, between 2nd May 2023 and 12th May 2023, FPIs have infused Rs 68 crore into the debt or bond market, further contributing to the overall investment landscape.
What Does an Increase in FPI Investment Mean?
FPI refers to investments in securities and financial assets by foreign investors. Unlike Foreign Direct Investment (FDI), FPI does not grant direct ownership of company assets and is relatively liquid, subject to market volatility.
When FPI and FDI invest, it serves as a crucial funding source. Experts closely monitor FPI as it is an indicator of stock market performance. FPI also enhances market efficiency and maintains a balance between value and stock prices.
Typically, FPI is higher in growing economies with substantial growth potential. It plays a vital role in driving stock markets and enhancing liquidity in the host country’s capital market.
Generally, growing economies with high growth potential see more Foreign Portfolio Investment. It plays a vital role in driving stock markets and enhancing liquidity in the host country’s capital market.
According to Zee Business, FPI inflows are expected to remain strong for the rest of the month as US non-farm payrolls and consumer price index-based inflation data came in line with expectations. Besides, the rupee remains strong, and the dollar is likely to depreciate in the near future. In such a situation, FPIs are expected to continue buying in India.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information only. This is not investment advice.