Snapping their three-month selling spree, foreign portfolio investors – or FPIs – have turned net buyers of Indian equities, so far, in January, 2022.
As of January 13, our foreign counterparts were net buyers of Indian securities worth $479 million, including equities worth $434 million. With this, India remains among the top five emerging markets where FPIs have invested this year.
Data provided by Bloomberg shows that India was among the two countries that saw net FPI outflows for three consecutive months, ending December, 2021.
While outflows from Indian equities totaled a massive $4,769 million during the period, net outflows from South Africa were $3,536 million.
For the full calendar year of 2021, Foreign Portfolio Investors pumped in Rs 50,089 crore in India. Their investment, however, is much less compared to net inflows of Rs 1.03 trillion in 2020 and Rs 1.35 trillion in 2019.
D-Street experts point at discomfort with valuations, concerns about the monetary policy support, and the rampant spread of the Omicron variant of coronavirus led to aggressive selling.
Besides, record high levels, touched by the benchmarks in mid-October, also gave FPIs a good reason to book out.
Let’s go to UR Bhat, co-founder and director at Alphaniti Fintech, to know more.
As pointed out by Bhat, FPIs have begun buying cheap in the Indian markets; although secondary market buying remains marginal.
That apart, the net buying at the beginning of the year is a relative play, believe analysts, as India seems to be managing the Omicron variant rather well.
Moreover, the purchasing managers' index and the goods and services tax numbers are an indication that the Indian economy is still in recovery mode, despite the onslaught of the new variant.
Hence, if India is able to manage its fiscal and forex situation well, India would stand tall among EM peers despite the rate hikes in developed economies.
Given this, Gaurav Dua, Head – Capital Market Strategy at Sharekhan by BNP Paribas (READ AS PARIBA), believes FII interest will remain intact for India as the country in on an upcycle.
Experts expect India to be a relative outperformer than other emerging markets. The Union Budget and the corporate commentary during the results season, they say, will also guide FPIs’ outlook on India.
From an investment view-point, EM investors can look at those plays which are set to benefit from high interest rates.
Mathieu Racheter, Head of Equity Strategy Research at Julius Baer, for instance, says, “While we are not worried about the absolute levels of (real) interest rates at this stage, it is much more about the speed of change in rate levels. As such, it is critical to apply a barbell strategy at this stage, incorporating structural winners with stocks that benefit from higher yields and inflation, such as financials.”
That said, while FII/FPI activity will be one of the key factors, determining the market trajectory over the long-term, the immediate trends will be set by Q3 results and the Union Budget.
Ultratech Cement, Bajaj twins, HUL, and Reliance Industries are among the prominent companies set to report their earnings this week.
Overall the Nifty50 is expected to move in the range if 17,650 and 18,500, while the Sensex may quote between 60,400 and 62,050.
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 "How can India sustain FPI buying in 2022?")
