FPIs likely to return to Indian markets over rupee recovery
New Delhi, June 21
Rupee is likely to appreciate further in the coming weeks and in the context of appreciating domestic currency, foreign portfolio investors are unlikely to sell significantly going forward, analysts said on Sunday.
The better-than-expected FY26 earnings growth of 15.6 per cent for Nifty 500 is providing fundamental support and resilience to the market.
"However, poor monsoon, so far this year, is becoming a concern," said analysts.
There has been a distinct change in the FPI action since June 15. During the week ending June 19, FPIs bought stocks on three days and sold for only two days.
"For the week ending June 19, the FPIs have net bought equity for Rs 3,386 crore in the cash market. It can be concluded that the relentless selling of FPIs in India is over. The principal reason for this change in FPI activity is the stability and slow appreciation in the rupee," explained Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
The Indian rupee has made a decent recovery from the low of 96.96 to the dollar (touched on May 20) to 94.34, the closing rate on June 19.
"Substantial inflows of dollars are expected via the FCNR B bonds in FY27. This, along with crash in Brent crude to $80 levels, will help India in financing the Current Account Deficit (CAD) in FY27 without any stress," said the analyst.
The concentration risk in investing in a few stocks in South Korea and Taiwan is making FPIs a bit worried.
However, the continuing artificial intelligence (AI) trade and the huge, expected profitability of companies like Samsung, SK Hynix and TSMC make these stocks still attractive.
Therefore, these stocks may still be bought on declines and FPIs may sell in India on rallies, said the market participant.
— IANS
Reader Comments
Interesting to see the global shift. FPIs moving away from concentrated bets in Korea/Taiwan and returning to India makes sense given our diversified economy. The crash in crude prices to $80 is a huge blessing for our CAD. Smart money follows stability 🇮🇳
I've been saying this for weeks - the rupee was oversold at 96.96. Now that it's recovering to 94.34, FPIs are naturally coming back. But let's not get too excited; if the US Fed hints at another rate hike, all this could reverse. Stay cautious, folks.
As an NRI, this is reassuring. The FCNR B bonds expected in FY27 will bring in substantial dollar inflows and help stabilize the rupee further. India's macro story is improving - lower crude, better earnings, and now FPI confidence returning. Good times ahead? 🤔
One point of criticism: analysts keep cheering FPI inflows, but what about domestic retail investors? We've been burned before when FPIs suddenly exit. The article mentions they may sell on rallies - that's exactly what happened in 2020. Let's not be complacent, please.
The 15.6% earnings growth for Nifty 500 is impressive, but I'm skeptical about how broad-based it is. Many sectors like IT and pharma are still struggling. Also, poor monsoon is a real threat to rural demand. Let's see if this FPI trend sustains through July.
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