Domestic equity markets in December rode on the back of strong inflows from foreign portfolio investors (FPIs) who pumped in a whopping Rs 66,134 crore last month. Nifty had ended the previous month with a near 8% uptick.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that the sharp upward move in the market in December coincided with the surge in FPI inflows, with net inflows of Rs 58,372 crore. On adding the investment made through the primary market, the December FPI inflows stand at Rs 66,134 crore, Vijaykumar said.
In December, FPIs were big buyers in financial services and IT and also shopped in sectors like autos, capital goods, oil & gas and telecom, Vijaykumar highlighted.
Attributing the big investment trend in the last two months of 2023, the Geojit analyst said that a sharp decline in US bond yields and a weaker dollar did the trick. FPI inflows which were negative in the 3 months before December sharply turned positive last month, he added.
Foreign portfolio investors net bought Indian equities, which includes both primary and secondary markets, worth Rs 1.77 lakh crore in 2023, according to StockEdge. This was the highest-ever inflow from FPIs in history, in rupee terms.While in rupee terms, it was at a record high, in dollar terms, inflows were the second highest at $21.23 billion in 2023 after 2020.Almost one-third of the inflows came in December alone, which was also the highest inflows in a month witnessed in 2023.
Vijaykumar expects this phenomenon to continue in 2024 reasoning that a further decline in US interest rates will likely increase their purchases in 2024, particularly in the early months in the run-up to the general elections and the largecaps will be major beneficiaries.
He also expects FPI inflows into debt instruments to see an acceleration in 2024.
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