During the course of six days, FIIs purchased equities worth $876 million; a signal of revived interest in India?

By: ISL | 21 February, 2023

According to an analyst, foreign investors are willing to pay more for Indian markets since they prefer stronger economic development overvaluation.

• Foreign institutional investors, who had been net sellers of Indian shares since the beginning of 2023 owing to concerns that global central banks would keep raising interest rates in response to inflation, bought a net $876 million worth of Indian equities during the course of six days.
• FIIs purchased $931.13 million worth of stocks between February 9 and 16, according to data from the National Securities Depository Ltd. From the year's beginning, FII have sold $3.34 billion in local stocks; in 2022, they will continue to be net sellers of $17.21 billion.
• The acquisitions were made despite the possibility of increased inflation in India and around the world and the central bank's unwillingness to slow the rate of interest rate increases. With higher-than-expected consumer inflation in the nation, economists increased their predictions that the Reserve Bank of India will boost rates.
• Meanwhile, US producer rates increased in January by more than forecast, showing ongoing inflationary pressures that could lead the Federal Reserve to carry out further interest rate increases.
• According to experts, India's macroeconomic indicators are still strong when compared to those of other markets. The GDP of the nation is anticipated to rise by 7% in FY23, the highest rate among emerging markets.
• The latest budget announcements of double-digit capex growth, greater expected GDP growth for FY24, and a commitment to fiscal restraint point to an improvement of the nation's financial condition.
• "More economic growth is always preferred by foreign investors above valuation. Hence, Mitul Shah, head of research at Reliance Securities, stated, investors are willing to pay a premium for Indian markets. "India is better positioned than most other countries to play in the next ten years, with greater growth underpinned by robust macroeconomics, government efforts, and the China-plus-one plan. We anticipate that FII inflows will continue, and double-digit returns for stocks will also be expected.
• The return of a bullish market is indicated by the over 30% increase in the MSCI Emerging Market Equities Index in 2023. Because the International Monetary Fund (IMF) recently altered its outlook for the global economy to the positive, analysts said, this trend encouraged investors to reconsider the chances of developing economies catching up with industrialized ones.
• Market optimism has been seen around the world as a result of the recent drop in commodity prices and signs that inflation is slowing. Lower gas prices, a weaker dollar, and optimistic mood over China's economic reform all contributed to a capital inflow into stock funds in Europe, China, and other emerging markets.
• According to economists, India is also seeing a corresponding rise in foreign investment flows as China gains from this shift in investor attitude.
• According to Deepak Jasani, head of retail research at HDFC Securities, "We may see the dollar losing momentum as the Federal Reserve's rate-hiking cycle matures and as relative economic growth outside of the US improves."
• "EM countries may profit from the relative appreciation of their own currencies while the dollar may decline. Even though US-China relations are still tense, other EM countries may benefit from the restructuring of vital supply networks.
• The week of January 18 saw a historic inflow of $12.7 billion into developing-market bond and equity funds, while $5.8 billion was left out of US equity funds. According to HDFC Securities, this marks a dramatic shift in investor attitude as more money is going into developing economies and away from American shares.
• According to analysts, emerging markets may continue to see inflows if the world's risk appetite remains strong. Yet, any considerable adjustment in interest rates by advanced nations could undermine this optimistic outlook.