FPI Flows into Indian Stock Market
(see at the end of this article, for latest data)
(A new blog post dated 28Apr2022 on FPI flows is available here)
(An updated blog dated 03Apr2022 is available)
There was a time when flows by foreign portfolio investors (FPIs) used to impact the Indian stock market considerably. But in the past five or six years, the influence of FPIs on Indian stock market has come down significantly though their influence continues selectively and especially in large-cap Indian stocks.
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In the past five or six years, domestic institutions (DIIs like, insurance companies, mutual funds and pension funds like Employee Provident Fund Organisation or EPFO) have been able to match the FPI flows acting as a counterweight.
A cursory glance at the monthly figures of FPI flows shows that their influence indeed is marginal in recent years.
After buying aggressively between November 2020 and March 2021, the FPI flows have turned volatile since April 2021. They seemed to have found other emerging markets more attractive compared to India, even as Indian stock valuations have gone up in the past nine months, despite India's GDP shrinking big in financial year 2020-21.
However, financial markets often are often, to use a cliche, forward looking. The enthusiasm for Indian stocks is predicated on the assumption that growth will accelerate in the current and next financial year.
Table showing monthly inflows and outflows by FPIs in Indian equity market for the period August 2019 till July 2021 (click on the image for a better view):
References:
My tweet thread dated 05Jul2021
N.B.: FPIs used to be called foreign institutional investors or FIIs.
Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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