FPI selling in India likely to slow down significantly over positive geopolitical cues
New Delhi, June 13
Foreign portfolio investors are unlikely to continue selling big in India in the context of stable currency and improving economic prospects and the selling is likely to slow down significantly, analysts said on Saturday.
There is a decreasing trend in FPI selling in India. On Friday, FPIs sold only for Rs 1,082 crore in the equity cash market.
"Recent geopolitical developments, which everyone expects to lead to a peace deal between US and Iran have led to sharp correction in the price of Brent crude to below $87. For a big oil importer like India, this is a huge positive," said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
India is facing a Balance of payments (BoP) deficit of about $60 billion in FY27. The Reserve Bank of India (RBI) and the Government of India had initiated a series of measures to attract capital flows to India which led to an appreciation in rupee from the recent low of Rs 96.96 to the dollar to Rs 95.20 to the dollar on June 12.
"There is a high probability of rupee again gathering some more strength if crude declines further, and this is likely if the US-Iran deal materialises. India's macroeconomic situation will improve significantly if crude continues to fall. GDP growth prospects will improve, and inflation need not rise to the expected 5.1 per cent in FY27. This can facilitate further appreciation of the rupee," said the analyst.
Indian equity markets ended a volatile week on a strong note, snapping a two-week losing streak amid improving global sentiment and supportive measures from the Reserve Bank of India (RBI) aimed at attracting foreign currency inflows.
Despite the positive finish, investors remained cautious amid persistent foreign institutional investor (FII) selling, elevated inflation concerns, and uncertainty surrounding the global interest-rate outlook.
Improving economic prospects for India, coupled with currency stability, can impart some confidence to FPIs, said analysts.
However, for FPIs to turn buyers in India, the ongoing AI trade has to end which appears some time away, according to market watchers.
— IANS
Reader Comments
The geopolitical stability is definitely helping, but I'm a bit skeptical about the AI trade ending soon. That might keep FPIs cautious. For now, I'd say it's a wait-and-watch situation for retail investors like us. Let's not get too excited just yet.
Finally some good news for the markets! The rupee appreciation and falling crude prices are exactly what we needed. Our economy is showing resilience. Kudos to the policymakers for their proactive steps. Hope this momentum sustains through the year. 📈
As a foreign investor, I do see the value in India's strong macro fundamentals now. The BoP deficit concern is being addressed, and currency stability is key. If crude keeps falling, India could become very attractive again. But the AI trade is the elephant in the room.
While the market is cheering this, I worry about the over-reliance on foreign flows. We need to build a stronger domestic investor base. The RBI's steps are good, but we can't keep depending on FPIs. Let's focus on making our own economy self-reliant.
The geopolitical optimism is well-founded. If the US-Iran deal materializes, oil prices could drop further, which would be a game-changer for India. However, we need to monitor inflation and global interest rates. A cautious but positive outlook from here. 👍
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