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Foreign portfolio investors (FPIs) have turned into net buyers in Indian stock markets after two months of selling in January and February, as per the data from the National Securities Depository (NSDL).
In March 2023, FPIs bought assets worth about Rs 7,936 crore in Indian stock markets, according to the NSDL data. The banking crisis that erupted in the US, following the collapse of Silicon Valley Bank in early March, appeared to have revived their interest in Indian stocks.
Silicon Valley Bank, a notable lender in the world of technology startups, collapsed on March 10, after depositors made a run on the bank. After the bank run, the local regulators closed down the tech lender and put it under the control of the US Federal Deposit Insurance Corporation (FDIC). The latest update reveals that First Citizens Bank has agreed to acquire all of the bank’s deposits and loans.
In January and February, FPIs sold equities worth Rs 28,852 crore and Rs 5,294 crore, respectively, as per NSDL data. Foreign investors were cautious amid the volatility in Indian stock markets at that time.
“The sustained selling by FPIs appears to be over since they have turned buyers in the last few days. The near-term outlook for FPI looks much more positive now. Even though Indian valuation continues to be relatively high, the recent market correction has made valuations a bit more reasonable than earlier,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Foreign portfolio investors had been selling equities in the Indian markets for over a year, with some exceptions, which started in October 2021 for various reasons.
Tightening monetary policy in advanced economies, including rising demand for dollar-denominated commodities, and strength in the US dollar, had triggered a consistent outflow of funds from Indian markets.
Investors typically prefer stable markets in times of high market uncertainty. The data on the NSDL website showed that in 2022, foreign portfolio investors sold Rs 121,439 crore worth of stocks in India on a cumulative basis.
Despite the reasons for the sustained selling by foreign portfolio investors, the recent turnaround in March 2023 is viewed as a positive sign by the market experts.
The renewed interest of foreign portfolio investors in Indian stocks is a good sign for the country’s economy, as it will boost market sentiments and strengthen investor confidence.