Rs 10,000 Crore In Last 10 Days! Why Foreign Investors Are Back To Pumping Money Into Indian Stocks

After being heavy sellers in 2022 and most of the beginning months of 2023, foreign institutional investors (FIIs) have started pumping money into Indian stocks once again. To the surprise of many market watchers, the average daily FII buying in the last 10 trading sessions has been more than Rs 1,000 crore.

Rs 10,000 Crore Invested In Last 10 Days

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In the last 10 trading sessions i,e. since March 28, the net inflow from FIIs on Dalal Street has been around Rs 10,581 crore, shows NSDL data, as per ET report. March month data shows that FIIs bought power, metals, auto and capital goods stocks but dumped oil and gas and IT stocks. This comes despite Sensex & Nifty being over 2% down this year to date.

Even if we only look at the current month which marked the beginning of the financial year 2023-24, the start has been good. After pulling out funds on a net basis in 2022-23, foreign portfolio investors (FPIs) started the current financial year on a positive note and invested Rs 8,767 crore in Indian equities so far this month (till 13th April).

Note that the Indian stock market was closed on 30th March, 4th April, 7th April and 14th April 2023 due to various occasions falling in the past two weeks, besides being closed on weekends as usual.

Also Read: World's Biggest Stock Market Crashes Of The 20th Century

Reasons Behind FIIs Coming Back

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Morningstar India's Associate Director - Manager Research, Himanshu Srivastava attributed a slew of factors for inflows, including stabilisation of the global scenario on the back of moderation in apprehensions about the banking crisis in the US and Europe, as per ET report.

This came after FPIs infused a net sum of Rs 7,936 crore in equities in March, mainly driven by bulk investment in the Adani Group companies by the US-based GQG Partners despite Hindenburg allegations.

On the derivative side, FIIs have reportedly covered shorts in April after their net short positions touched an all-time high a month ago. Insiders opine that the FII short-covering could continue to Nifty and touch at least the 18,200 mark and thus the index may start to look relatively expensive.

Also, as per the report, Index valuations have been corrected, making it attractive for them to build up their positions. The past few years have seen the rise of the domestic investor acting as a backstop, unlike before when FIIs used to flee from Indian equities and leave the markets relatively more susceptible to the impact of hot money. This is likely to continue as people get more financially savvy. This has also given confidence to the FIIs that market participants have become more like stayers instead of fleeing in panic.

The other reason FIIs have started pouring dollars again into Indian stocks is that the country's growth story remains intact in a worrisome global macro backdrop. Even the IMF has repeatedly appreciated Indian economy amid rising global recession fears.

While the recent figures do show the return of FIIs into the Indian stock market, FIIs are unlikely to make a big comeback on Dalal until the time the US central bank, the Federal Reserve starts cutting interest rates again. Earlier this month, India's central bank RBI finally put a pause on rate hikes after raising the repo rate six times in the past 11 months.

Ahead of Fed Reserve's meeting on May 2-3, Wall Street traders see a 78% probability of the Fed hiking interest rates by another 25 basis points, as inflation remains a concern in the US.

Also Read: Analysts' Prediction Indian Stock Market For 2023

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