FII flows remain erratic in 2023 so far while DIIs invest more than $10 billion

• Net FII inflows have been negative for the first two months of the year, thanks to rising interest rates in the US.
• The sell off by FIIs turned positive in March after being in red for three consecutive months.
• While FIIs were busy selling, DIIs including mutual funds and insurance companies bought stocks during periods of volatility.

Net investments by foreign institutions turned positive in March, all thanks to investment in Adani Group companies by the US-based GQG Partners. Foreign institutional investors have been selling down stocks for three consecutive months now.

GQG Partners had on March 2 picked up stakes in four group companies for ₹15,446 crore. Following this, a day later Adani group’s combined market capitalisation also increased by ₹81,980 crore fueling investor sentiment and recovering some investor confidence.

The four companies Gautam Adani sold shares in included — Adani Enterprises, Adani Ports & Special Economic Zone, Adani Transmission and Adani Green Energy.

The irony is that the crisis in Adani stocks was also among the major reasons for the volatility in the home market a few weeks back, due to Hindenburg Research's fraud allegations and other regulatory aspects related to stock markets.

However, the correction in the markets is making them attractive and that could enthuse more investors going forward, experts say. “The near-term outlook for FPI looks much more positive now. Even though Indian valuation continues to be relatively high, the recent market correction has made valuations a bit more reasonable than earlier,” said Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services.

“FPIs turning buyers in banking will help banking stocks scale higher levels assisted by good Q4 results,” said Vijayakumar. In the last one week, Nifty Bank has surged more than 3%, after huge sell off in these stocks this year.

A better year for FIIs
Sanjeev Hota, vice president, head of research at Sharekhan BNP Paribas expects India to clock in net FII inflows this year, as last year saw sharp outflows. Globally, macroeconomic headwinds are showing signs of fading, though it’s too early to say if volatility will end, he opines.

“At 17.5x one year forward valuation, it looks reasonable to put new money in the markets. Besides, this is the right time for long term investors to put money after the recent correction. Long term India's growth story looks solid and it is providing an opportunity for investors to accumulate quality stocks at reasonable levels,” said Hota.
Source: NSE

FII exits have been making headlines especially for many months now because of the rising interest rates in the US market.

Rise in the US interest rates does not bode well for the Indian markets, as it can lead to foreign investors pulling their money out from emerging markets like India and infuse into treasuries and money markets of the US that look more attractive.

While FIIs were busy selling Indian equities, domestic institutional investors (DIIs) including mutual funds, insurance companies bought more Indian stocks during volatility.
Source: NSE


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