Foreign Portfolio Investors' Holdings Surge by 13% in the December Quarter

In the December quarter of the fiscal year, the holdings of Foreign Portfolio Investors (FPIs) in Indian stocks soared to an impressive $738 billion. This represents a significant growth of 13% from the $651 billion recorded in the previous quarter. This upswing has been primarily attributed to the robust performance of the Indian stock market.

Year-On-Year Growth

The investment value of FPIs has also shown remarkable year-on-year growth, escalating by 26% from the $584 billion marked in December of the preceding year. The ascension in value signals a sustained confidence in the Indian equity markets.

Market Capitalization Share

Despite the increase in total investment value, the share of FPIs in the Indian market capitalization noted a slight decrease, dropping to 16.83% in the December quarter from 16.95% in the September quarter.

Investor Behavior

After a phase of withdrawal in the September quarter, where FPIs pulled out $5.38 billion, they shifted to a buying stance in the December quarter. The buying spree, totaling $6.07 billion, was influenced by various factors including a dip in U.S. Treasury bond yields and a decrease in crude oil prices.

A conducive investing environment was fostered by the political stability ensuing from the Bharatiya Janata Party's victories in state elections and promising economic performance relative to other economies, which captivated FPI interest.

A Temporary Setback

Despite this positive momentum, FPIs experienced a brief setback in January, retracting $3.10 billion from Indian equities. This backward step was driven by several reasons, including profit booking and waiting for clear signals regarding the interest-rate scenario. Additionally, the sale of shares in HDFC Bank following below-expectation quarterly results prompted heavy selling by FPIs.

Looking beyond India, FPIs' attention was also diverted due to increasing geopolitical tensions in the Middle East, the US Federal Reserve's stern stance on interest rates, and a significant rise in US Treasury bond yields. These factors have caused FPIs to adopt a cautious approach towards emerging markets.

FPIs, Investment, Growth