Despite record foreign portfolio investor outflows of Rs 4.55 trillion, the Indian equity market in Samvat 2082 was significantly supported by unprecedented net purchases of Rs 8.55 trillion from domestic institutional investors, navigating global turmoil and shifting investment trends.
Illustrations: Dominic Xavier/Rediff
Key Points
- FPIs recorded their highest-ever net selling in Samvat 2082, withdrawing Rs 4.55 trillion from the Indian equity market.
- DIIs made record net purchases of Rs 8.55 trillion, effectively cushioning the impact of foreign outflows.
- The year was marked by global turmoil, a shift towards AI-focused firms, and a surge in crude oil prices.
- A recent trend reversal saw FPIs becoming net buyers and DIIs net sellers in the week leading up to November 6, driven by US midterm election results and cooling crude oil prices.
- A sustained decline in crude oil and softer US bond yields could improve the environment for foreign portfolio flows into India.
Foreign portfolio investors (FPIs) recorded their highest-ever net selling in the Indian equity market during Samvat 2082, withdrawing Rs 4.55 trillion, while domestic institutional investors (DIIs) cushioned the impact with record net purchases of Rs 8.55 trillion.
The year witnessed heightened global turmoil, a shift in global portfolios towards artificial intelligence (AI)-focused firms, and a surge in crude oil prices.
Domestic Capital’s Role
The sustained flow of domestic capital absorbed foreign selling and supported the market amid persistent global uncertainties, market experts said.
In a noteworthy shift, the last week before the end of the current Samvat saw a trend reversal, with FPIs recording net buying of Rs 45,960 crore while DIIs turned net sellers, offloading shares worth Rs 24,197 crore in the week ended November 6.
The reversal came on the back of the US midterm election results and a cooling in crude oil prices.
Outlook for Foreign Flows
“A sustained decline in crude oil could therefore improve India’s trade balance, reduce dollar demand and ease pressure on the balance of payments and rupee.
“If this is accompanied by softer US bond yields, the environment for foreign portfolio flows could improve as well,” Axis Mutual Fund noted in a report following the US midterm elections.
“If India’s external macro pressures ease without a meaningful deterioration in domestic earnings, foreign investors could reassess the relative attractiveness of Indian equities,” it added.
Historical Context of Flows
FPI net selling during Samvat 2082 was significantly higher than the Rs 3.15 trillion recorded in Samvat 2081 and the previous peak of Rs 3.63 trillion in Samvat 2078.
DIIs, meanwhile, invested Rs 8.55 trillion during the Samvat, surpassing their previous record net buying of Rs 6.88 trillion in Samvat 2081.
FPIs also remained net sellers, withdrawing Rs 2.77 trillion during Samvat 2082 compared with an outflow of Rs 1.5 trillion in the preceding Samvat year.
Mutual funds continued to provide substantial support to the market, recording net equity investments of Rs 5.56 trillion during the period, compared with Rs 4.79 trillion in Samvat 2081, with sustained inflows through systematic investment plans.
