FPIs Come Back To Indian Market, Pour Rs 22,766 Crore In First Half Of December; What Caused Return?

Foreign Portfolio Investors (FPIs) have made a comeback in Indian equity markets, injecting a net investment of Rs 22,766 crore in just the first two weeks of December. This surge follows significant outflows in previous months.

Shift in Investment Trends

The revival comes on the back of a dismal phase for FPIs, who pulled out Rs 21,612 crore in November and Rs 94,017 crore in October, the largest monthly outflow on record. Interestingly, September had witnessed a nine-month high for foreign inflows, with a net investment of Rs 57,724 crore.

With December's inflows, FPI investments in 2024 have now reached Rs 7,747 crore, according to data from depositories. This turnaround is attributed largely to expectations of an impending rate cut by the US Federal Reserve, which has boosted market sentiment.

Market Performance

Indian equity markets have also mirrored this optimism, extending gains for the fourth consecutive week. The benchmark indices, Nifty and Sensex, closed the week at 24,768.30 and 82,133.12, respectively. Despite experiencing consolidation during most of the week, the indices managed to end on a strong note, supported by favourable macroeconomic data.

Ajit Mishra, Senior Vice President of Research at Religare Broking, highlighted the market's resilience amid global volatility. "Lower CPI inflation and an improved Index of Industrial Production (IIP) have boosted market sentiment. However, mixed trends in Foreign Institutional Investor (FII) activity and profit-booking in global markets have capped the upside," Mishra noted.

Sectoral & Technical Outlook

From a technical perspective, Mishra emphasized the importance of the 24,800 mark on the Nifty. "A decisive move above this level could trigger a recovery toward the 25,200-25,500 zone, while the 24,300-24,400 range is expected to provide strong support on a closing basis. A 'buy on dips' strategy remains prudent, with IT and banking stocks leading the charge," he added.

Mishra also pointed to midcap and smallcap indices, which may see consolidation following their recent outperformance. He advised traders to adopt a cautious and selective approach, particularly in these segments.

Global & Domestic Catalysts

The coming week will be pivotal for market participants, with key data points such as the HSBC Composite PMI, Manufacturing PMI, and Services PMI set to shape sentiment. However, all eyes are on the US Federal Reserve's upcoming meeting, where a 25 basis point rate cut is widely anticipated. The Fed's guidance on future rate policies will hold significant importance for global and domestic markets alike.

In addition to global cues, the performance of Indian companies in the ongoing third-quarter earnings season and the country's broader economic growth trajectory will play crucial roles in shaping foreign inflows.