The first two sessions in February have seen FPI inflows of Rs 2,053 with Nifty gaining by 128 points. On Thursday, the FPIs shopped for shares worth Rs 1,740.15 crore while on Friday equities worth Rs 312.64 crore were bought according to data available on NSDL.
The selling was amid a lackluster first month with Nifty ending flat on a month-on-month basis at 21,725.70 down by 6 points over December closing of 21,731.40.
An important feature of the FPI flows in January this year was the divergent trends in equity and debt flows, analyst V K Vijayakumar who is Chief Investment Strategist at Geojit Financial Services said as he decoded the FPI trends. “While equity saw net selling of Rs 25,734 crores, debt saw net buying of Rs 19,836 crores. These figures are inclusive of cash market and primary market and others,” he said.
He attributed three reasons for this trend. One was the US bond yields rising to around 4.16% in January from around 3.88% in December 2023 as elevated bond yields prompted outflows from equity to high yielding US bonds.
Another reason was Indian equity becoming most expensive in the world with Nifty trading at PE of around 21 based on FY24 estimated earnings, the Geojit analyst said as he attributed this reason to have triggered equity selling in India. The third reason was front-running by some FPIs in the Indian bond market anticipating flows into the domestic bond market after the inclusion of India in the JP Morgan Emerging Market Bond Fund. Vijayakumar said that going forward, FPI inflows into the equity market will depend on the trends in the US bond yields and the equity market trends globally as well as in India. “Since the US bond yields have again corrected sharply, FPIs are unlikely to sell in large volumes in February. They may even turn buyers. The inflows into the debt market are likely to continue,” he opined.
Indian headline indices trimmed their morning gains amid selling pressure in private banks to end below their day’s highs. However, strong buying action in index heavyweight Reliance Industries and IT stocks drove Nifty50 to fresh record highs on Friday. Nifty hit a lifetime high of 22,126.80 before ending at 21,853.80, up by 156.35 points or 0.72%. Meanwhile, BSE Sensex surged as much as 1440 points today before settling at 72,085.63, 440.33 points or 0.61% higher.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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