2023 sees FPIs invest Rs 1.7 lakh billion in Indian stocks

 2023 sees FPIs invest Rs 1.7 lakh billion in Indian stocks

2023 sees FPIs invest Rs 1.7 lakh billion in Indian stocks

FPI investments have increased significantly in 2023 as a result of a large spike in inflows at Rs 66,134 crore in December.

Amidst a tough global climate, foreign portfolio investors (FPIs) made a stunning return in 2023, investing Rs 1.7 lakh crore in Indian equities markets, motivated by their faith in the country's solid economic fundamentals.

FPI investments have increased significantly in 2023 as a result of a large spike in inflows at Rs 66,134 crore in December.

FPI inflows are anticipated to continue to be robust in the future. The creator of Fidel Folio and smallcase manager Kislay Upadhyay said that their distribution is probably going to be selective.

According to VK Vijayakumar, chief investment strategist at Geojit Financial Services, FPIs may boost their purchases in 2024 due to concerns about a prolonged decrease in US interest rates, particularly in the first few months of the year before the general elections.

FPIs invested a total of Rs 68,663 crore in the loan market and Rs 1.71 lakh crore in equity in 2023. Based on information provided by the depositories, their combined investments in the stock market amounted to Rs 2.4 lakh crore.

Due to aggressive rate rises by central banks worldwide, foreign investors withdrew a net total of Rs 1.21 lakh crore from Indian stocks in 2022, which was the biggest outflow on record. Prior to the outflow, in the last three years, FPIs made investments.

The net amount of equity investments made by FPIs was Rs 25,752 crore in 2021, Rs 1.7 lakh crore in 2020, and Rs 1.01 lakh crore in 2019.

According to Abhishek Jain, director of research at Arihant Capital, "India's strong economic outlook, adaptability to geopolitical issues, as well as powerful domestic consumption story make the nation an attractive investment destination."

Over Rs 66,000 crore of this year's Rs 1.71 lakh crore investment was made in December as a result of enhanced political stability brought about by the BJP's victory in the most recent elections in three significant states.

FPI inflows were negative for the preceding three months prior to the massive investment in December.

According to Vijayakumar of Geojit, "the sudden change in FPIs' strategy has come due to an ongoing decrease in US bond yields."

Foreign investors entered the debt markets this year after a three-year hiatus, making investments totaling Rs 68,663 crore in 2023. Their patterns of capital movement have changed significantly as a result. A startling Rs 18,302 crore in investments were made in December as part of this massive influx.

FPIs pulled out of the debt market in 2022, 2021, and 2020, totaling Rs 15,910 crore, Rs 10,359 crore, and Rs 1.05 lakh crore.

The news in September from JPMorgan Chase & Co. that it will include Indian government bonds in its benchmark emerging market index starting in June of next year has affected the inflows into the nation's bond markets this year.

Scheduled for June 2024, this historic inclusion is anticipated to bring India some US$20–40 billion in the following 18–24 months. According to Himanshu Srivastava, assistant director-manager research at Morningstar Investment Research India, the inflows would increase international investors' access to Indian bonds and may even cause the rupee to appreciate, which would improve the country's economy.

Furthermore, interest rates have significantly risen as a result of the heightened attention on inflation, particularly in the debt market, where FPIs have been steadily increasing their investments, according to Jain of Arihant Capital.

Furthermore, in comparison to the stock markets, the Indian debt market has extremely little penetration. According to Upadhyay, the manager of Smallcase, there is a great deal of room for growth.

For the next several months, "we expect FPI inflows into both equity and debt to continue," he said.

The financial, IT, pharmaceutical, and energy sectors were given top priority by FPIs due to the nation's capabilities in technology and healthcare as well as its dedication to sustainable growth, which drew in international investors.