Foreign Investors Eye Indian Stocks in November, Signaling Confidence in Economy

Foreign Portfolio Investors (FPIs) have pivoted their focus back to India, turning into net buyers in the Indian stock market during November. The investment shift saw a significant aggregation amounting to Rs 9,001 crore for the month.

Such enthusiasm from foreign investors comes at a time when India has showcased a resilient and robust economic growth, thus securing its title as one of the fastest-growing major economies. This economic expansion is accompanied by inflation rates that are generally regarded as favorable, as well as a prevailing atmosphere of political stability as the country anticipates the General Elections of 2024.

The latest data from the National Securities Depository Limited (NSDL) suggests a sustained interest, with FPIs purchasing Indian stocks worth Rs 9,744 crore in early December, surpassing the investments made in November.

Prior Market Sentiments

Before this renewed interest in November, FPIs had adopted a cautious approach and were net sellers. The preceding months saw considerable sell-offs, with outflows of Rs 14,768 crore in September and Rs 24,548 crore in October.

However, looking earlier into the year, FPIs displayed varied patterns of investment with purchases worth several billion rupees from March to August -- reflecting a more optimistic outlook during that period.

For the year 2023, cumulative purchases by FPIs have been impressive, reaching a total of Rs 114,716 crore, according to the NSDL.

FPI Investment Trends and Outlook

In the preceding year, FPIs had largely withdrawn from the Indian equity markets, with October 2021 marking the beginning of a substantial selling phase. The year 2022 saw a sell-off amounting to Rs 121,439 crore on the whole, showcasing a trend of reticence among foreign investors.

Analysts attribute the November buying to a host of factors that underscore India's investment appeal. These include strong growth prospects, political stability, and an advantageous global economic climate, as indicated by the dip in US bond yields and oil prices.

Furthermore, along with equities, the Indian debt market is gaining traction with FPIs, having welcomed an inflow of Rs 50,270 crore in 2023 so far.

Market experts suggest that the favorable economic forecast, potential global index inclusion, and a stable political environment make Indian bonds particularly attractive to foreign investors. Additionally, continued state election victories by the ruling BJP signal political stability, which bodes well for investor confidence.

With potential joint ventures and new companies setting up operations in India, the country is poised to attract significant foreign investment in the near future. This investment drive is underpinned by strong fundamentals in both the equity and debt markets, further reinforcing the positive outlook for foreign inflows into India.

inflow, investment, economy