The Nifty 50 and BSE Sensex were little changed in January due to foreign fund outflows and rose 1% last month on FPI buying and strong domestic inflows.
Foreign investors (FPIs) bought Rs 22,419 crore in the Indian bond market last month, adding to the positive momentum seen in 2023. The benchmark Nifty 50 and BSE Sensex were little changed in January despite foreign investment. FPI sales and domestic outflows last month CLSA for international traders said in a note.
‘’FPIs are steadily increasing their buying in debt market. They have bought debt to the tune of ₹22,419 crore in February on top of the ₹19,836 crore which they bought in January. This trend of steady debt investment is likely to continue,” stated Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“It is crucial to acknowledge the strong macroeconomic, corporate fundamentals and macro stability that underpin India’s equity markets and their valuations,” added Mike Shiao, chief investment officer, Asia ex-Japan at Invesco.
In individual industries, there is a trend in sales of automobiles and medical stocks, while foreign trade continues in the financial industry. FPIs sold about ₹ 40 billion in financial services securities in the first two months of 2024, due to a 5% decline in financial indices during the same period.
Reasons why FPIs are investing on Indian debt markets
1. Addition of bonds in JP Morgan indices
According to market experts, the trigger is the announcement to include Indian government bonds in the JP Morgan GBI-EM Global Diversified Index (and other related brands) with a weighting of 10% from 28 of June 2024.
According to analysts, this entry will increase FPI share in Indian GSec from 1.6-1.7% currently to 3.5-4% in FY2025. Last month, Bloomberg Index Services said it was seek comments on a proposal to include India’s FAR bonds in emerging market regional currency indices.
2.US bonds
Market experts say strong selling by FPIs will push US 10-year yields above 4.15%. US Treasury yields rose from 3.88% in January to 4.16%. Indian stocks are also among the most valuable stocks in the world, trading on the Nifty at a PE of around 21 at FY24 prices.
“For February FPIs have turned buyers in equity for ₹1,539 crore. This is despite the US bond yields ruling high with the 10-year yield at around 4.25 per cent. FPIs may again turn sellers in some of the coming days. But they are unlikely to sell aggressively because their selling is not having any impact on the market which is setting new record highs,” added Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
