News

Published: Apr 24, 2023
Updated: Apr 24, 2023

Foreign Portfolio Investors Show Positive Sentiment Towards Indian Equities

Foreign Portfolio Investors (FPIs) have started the new financial year by purchasing Indian equities. FPIs bought shares worth Rs 8,767 crore ($1.07 billion) on a net basis in the first half of April, indicating positive sentiment towards Indian equities. However, this buying activity was partly due to US investment firm GQG Partners' investment of $1.87 billion in four Adani Group companies in March.

FPI Flows and the Benchmark Nifty 50

FPIs sold equities worth Rs 37,632 crore in the previous fiscal year, marking two straight years of net sales for the first time. Analysts expected FPI flows to improve after the selling witnessed in the last two financial years. The benchmark Nifty 50 saw a decline of 4.12% between January and March this year, resulting in a decrease in its price-to-earnings ratio to 20.44 as of March 31.

Easing Risks and Strong Growth Prospects Aid Sentiment

After selling financial services shares worth Rs 29,993 crore in FY23, FPIs bought shares worth Rs 4,410 crore in the sector in the first half of April, aided by easing risks of contagion in the global financial system and strong growth prospects for domestic lenders. FPIs also showed renewed interest in the information technology and auto sectors.

Domestic Mutual Funds Enter Smallcap Market

While the Nifty 50 is down nearly 2.79% in 2023 so far, the smallcap index has lost 4%, making domestic valuations attractive. The fall in smallcap stocks also attracted domestic mutual funds, which bought over Rs 2,100 crore worth of equities in the segment in March.

Experts expect FPI's flow to improve compared to last 2 years

FPI buying activity indicates positive sentiment towards Indian equities, although it was partly due to a large investment in the Adani Group companies. Analysts expected FPI flows to improve after two straight years of net sales. The easing risks of contagion in the global financial system and strong growth prospects for domestic lenders aided sentiment in the financial services sector. Renewed interest in the information technology and auto sectors was also observed. Domestic mutual funds entered the smallcap market, which saw a sharper correction than the benchmark Nifty 50.