Foreign portfolio investors (FPIs) made significant investments of Rs 6,850 crore on June 3 after the release of exit poll results but quickly turned into major sellers over the next four days amid volatile market conditions following unexpected poll outcomes.
In June, FPIs withdrew a total of Rs 18,109 crore from the cash market, excluding IPO investments, as per exchange data. On the contrary, domestic institutional investors (DIIs) showed a net purchase of Rs 6,864 crore worth of equities in the same period.
The largest FPI outflow of Rs 12,436 crore was recorded on June 4, coinciding with a 6% crash in the Sensex following the Lok Sabha election results announcement. Despite a 3.2% recovery in the Sensex on June 5, FPIs continued selling with an outflow of Rs 5,656 crore, followed by another outflow of Rs 6,867 crore on June 6.
Analysts attribute recent FPI withdrawals to India’s high valuations compared to other markets like China, coupled with election-related uncertainties. With the election results concluded and a new NDA coalition government formed, analysts anticipate renewed FPI interest in Indian markets.
Deepak Jasani, Head of Retail Research at HDFC Securities Ltd, highlights upcoming events like confidence-boosting measures such as a vote of confidence, cabinet announcements, and policy decisions, including the Union Budget, as potential triggers for FPI confidence. Additionally, indications of rate cuts by central banks like the US Federal Reserve or the RBI could enhance FPI interest.
Positive monsoon developments and improved corporate earnings outlook post-election could further attract FPI investments. These factors contributed to a 0.93% rise in the Sensex and an 0.89% increase in the Nifty on Thursday, reflecting market optimism amidst FPI fluctuations.