FPIs’ investment in domestic equities jumps 7% to $592 billion in Q1FY22

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Thanks to the strong performance of domestic equity markets, value of investments by FPI (foreign portfolio investors) in the domestic equities reached $592 billion in three months ended June 2021, a surge of 7% from the preceding quarter, according to a Morningstar report. The rally also saw FPIs pouring in more money into the Indian markets.

“As of the quarter ended June 2021, the value of FPI investments in Indian equities stood at $592 billion, which was considerably higher than the $552 billion recorded in the previous quarter, a spike of around 7%,” the report noted.

As of June 2020, the value of FPI investments in Indian equities had been $344 billion.

However, overseas investors’ contribution to domestic equity market capitalisation dropped marginally during the quarter under review to 19.1% from 19.9% for the March quarter.

For the quarter ended June 2021, FPIs were net buyers to the tune of $0.68 billion compared with the net inflow of $7.64 billion was recorded during the quarter ended March 2021.

After being wary in April and May led by the second wave of the pandemic overseas investors sold net assets worth $1.29 billion and $0.39 billion, respectively. However, they came back strongly in June to pump in $2.36 billion as the situation turned favourable for them.

“They (FPIs) also started to stay on the sidelines while waiting for stronger and more stable signs of recovery in the economy and for corporate earnings to be revealed after the second wave of the pandemic,” stated the report.

Besides this, rising valuations, the surge in oil prices, and firmness in the US dollar made them wary of the near-term risks, it added.

“While they chose to book profit with stock markets trading at near all-time highs, lingering risk of a potential third wave of Covid-19 in India added to their concerns. The challenges to the near-term prospects reduced their appetite for Indian equities. Consequently, FPIs were net sellers to the tune of $1.51 billion in July,” noted the report.

It, further, pointed out that net outflows were not exceedingly high, signifying that foreign investors are cautious toward Indian equities rather than negative on it.