Explore why after months of selling off FII holdings and shifting their focus to other emerging economies, FIIs are again focusing on India.
The Indian markets witnessed a sudden surge in FII investments in March 2023, signalling renewed investor confidence. After months of selling off their holdings and shifting their focus to other emerging economies, FIIs are again turning their attention to India.
In the first half of April 2023 alone, FIIs net bought an impressive Rs 8,767 crore in equities, marking the most significant inflows since the beginning of the year.
CNBC TV18 said this buying spree was mainly driven by financial stocks worth Rs 4,410 crore.
But that’s not all – the IT sector also saw significant net buying worth Rs 1,002 crore, and the metals and mining sector witnessed an inflow of investments worth Rs 675 crore.
To put it into perspective, foreign investors have been dumping their Indian holdings since the beginning of 2023 because other Asian markets like China, Taiwan, and Korea were trading at cheaper and more appealing valuations.
However, the tide has turned, and India is again in the spotlight.
Reason Behind The Buying Spree
Nifty PE is a significant factor behind the recent shift in foreign investor sentiment towards India’s markets. In December 2022, during the FIIs major selloff, Nifty PE was trading at a relatively high 22.61, while the Shanghai Composite Index PE stood at a much lower 13.06.
However, things have changed significantly since then. By March 2023, the Nifty 50 had corrected considerably, resulting in a sharp drop in Nifty PE to 19.97 as of 24th March 2023.
As of 21st April 2023, Nifty PE was trading at 20.61, attractive from the levels seen just a few months ago.
This drop in valuation could be one of the main reasons foreign investors are again flocking to India’s markets, as they see more significant potential for returns.
Secondly, according to an IMF report, India’s Real GDP growth is projected at 5.9% and average inflation is said to stay at 4.9%, which is more resilient than other Asian countries like China, whose Real GDP growth is projected at 5.2% and may slow down in the upcoming times according to IMF report.
This might be another reason that FIIs consider India an attractive bet.
Because of attractive PE and resilient future growth prospects, FIIs invest in the Indian markets. Following the recent surge in foreign investor inflows, seeing the future of India’s needs will be exciting.
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 article is for information only. This is not investment advice.