FPI holdings in equities surge to $738 billion

FPI equity surge: Foreign Portfolio Investors (FPIs) witnessed a notable upswing in their holdings in state-owned equities, reaching a substantial $738 billion in the three months concluding in December 2023, as reported by Morningstar. This reflects a remarkable 13 per cent surge from the preceding quarter's figure of $651 billion, primarily fueled by the robust performance of the domestic stock market.

On a year-on-year basis, the value of FPI investments exhibited a robust growth of 26 per cent, rising from $584 billion in December 2022. The report attributes this surge to the impressive performance of domestic equity markets and substantial net inflows from FPIs.

Positive trend

Despite the overall positive trend, FPIs' contribution to Indian equity market capitalization experienced a marginal dip, declining to 16.83 per cent during the quarter under review from 16.95 per cent in the previous quarter. After withdrawing $5.38 billion in the September quarter, foreign investors pivoted to being net buyers, injecting $6.07 billion into Indian equity markets in the final quarter of 2023, influenced by factors such as the decline in US Treasury bond yields, successful IPO listings, and the drop in crude prices.

The report highlights the impact of political stability following the Bharatiya Janata Party's victory in major state elections, creating a favourable climate for investors. However, this positive momentum waned in January, with FPIs turning into net sellers and withdrawing $3.10 billion from the equities, citing factors like profit booking and caution amidst uncertainty over the interest-rate scenario.

Furthermore, the report points to various global factors influencing FPI behaviour, including escalating geopolitical tensions in the Middle East, hawkish comments from the Fed on interest rates, and a sharp surge in the treasury bond yields, leading FPIs to shift their focus away from emerging markets.

(with PTI inputs)