In a notable turnaround, Foreign Portfolio Investors (FPIs) emerged as significant buyers in the Indian equity markets, injecting a robust sum of Rs40,710 crore into shares during the initial fortnight of March. This surge comes amidst a backdrop of improving global economic conditions and a resilient domestic macroeconomic outlook.
The data furnished by depositories revealed a stark contrast to the preceding months, with FPIs exhibiting a modest investment of Rs1,539 crore in February, following a substantial outflow of Rs25,743 crore in January. The fluctuating strategies of FPIs, often influenced by changes in US bond yields, have been closely observed. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized the potential for renewed selling pressure should US bond yields, responding to persistent inflation, spike once more.
However, while March saw a resurgence in FPI activity, experts caution that the figures may be inflated due to bulk deals executed through stock exchanges, thus not offering a precise indicator of FPI engagement. Nevertheless, the overarching trend of increased FPI investment remains apparent.
Himanshu Srivastava, Associate Director Manager Research at Morningstar Investment Research India, attributed the inflows to the improved global economic environment and the favorable Indian macroeconomic scenario. Additionally, the recent market correction presented an opportune moment for FPIs to enter high-growth markets like India.
Shantanu Bhargava, Managing Director and Head of Discretionary Investment Services at Waterfield Advisors, cited factors such as robust GDP growth, anticipations of RBI policy shifts with potential rate decreases, and expectations of a favorable electoral outcome for the ruling party as contributing factors to the influx of foreign funds.
Despite the influx of foreign investments, Indian markets witnessed a correction, with the NSE Nifty ending its four-week winning streak and erasing gains from the previous three weeks. The BSE Sensex followed suit, experiencing a 1.99% decline. The Midcap-100 and Smallcap-100 indices suffered more substantial losses, falling by 4.66% and 5.49%, respectively.
Sector-wise, only the Nifty IT index managed to close with gains, while all other indices faced significant declines. The negative market breadth was evident, with both FIIs and DIIs making substantial purchases of Rs.9,311.24 crore and Rs.28,046.49 crore worth of stocks, respectively, during the month.
The correction was palpable in the Nifty's technical charts, with a bearish engulfing candle forming on the weekly chart after seven weeks. While the market experienced declines, the 10-week average provided solid support, being defended by bulls multiple times in recent weeks.
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