FPIs were net sellers in just four months of the year and buyers in the remaining eight, which saw them return as buyers in 2023 after outflows of ₹1.21 lakh crore in 2022 to purchase ₹1.65 lakh crore worth of Indian shares.
In 2023, after making outflows of ₹1.21 lakh crore in 2022, foreign portfolio investors (FPIs) came back as buys, purchasing ₹1.65 lakh crore worth of Indian shares. In the course of the year, FPIs were net sellers in four months and purchasers in the remaining eight.
Foreign portfolio investors (FPIs), who had withdrew ₹1.21 lakh crore in 2022, made a comeback as purchases in 2023, purchasing ₹1.65 lakh crore of Indian equities—the largest FPI inflow since 2020, when buying totaled ₹1.7 lakh crore.
This was the result of macroeconomic improvements, record-high markets, decreasing inflation, expectations of a rate decrease in 2024, and the potential for the current administration to win a third term in the general elections the following year.
The Indian stock market started 2023 on a downward trajectory but ended up with a strong recovery. The Nifty index had a noteworthy year-to-date return of +18%. The market saw the introduction of 57 mainboard IPOs. Certain industries, like defense, real estate, autos, public sector enterprises (PSEs), and pharmaceuticals, performed exceptionally well. On the other hand, new-age businesses showed mixed results during this time.
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In terms of economics, India became the world’s fifth-largest economy and continued to grow at the fastest rate, even in the face of worries about recessions in other developed countries. The Reserve Bank of India raised repo rates to 6.5% in February, but then decided to pause the increase in order to strike a balance between managing inflation and maintaining growth rates. The Israel-Hamas conflict, while unexpected, did not derail the market’s general upward trend. The results of the state assembly elections earlier this month suggested that the current Modi government might be able to win a third term in the upcoming general elections.
As the year came to an end, the US Fed signaled at least three rate cuts in 2024, while the RBI raised its FY24 GDP guidance by 50 basis points to 7%.
FPI pattern
FPIs were net sellers in four of the year’s months and buyers in the other eight.
The FPIs had a bad start to the year, selling ₹28,852 crore worth of Indian equities in January and ₹5,294 crore in February. After that, however, they were purchasers for six months in a row, from March to August, when they recorded inflows of ₹1.69 lakh crore.
Debt market
With inflows of ₹67,786 crore, FPIs became net buyers of Indian debt for the first time in four years in the calendar year 2023. Prior to this, they were net buyers of Indian debt in 2019, having invested ₹24,058 crore in bonds.
The debt markets had FPI outflows in just one month in 2023 – March (worth ₹2,505 crore). In January and February, FPIs invested ₹3,531 crore and ₹2,436 crore, respectively. FPI infusions totaling ₹17,425 crore in December, positive for the ninth consecutive month since April.
The total amount of FPI inflows, including bonds and stocks, is ₹2.3 lakh crore.
FPIs have sold the most IT equities this year due to fears of a recession, but they have also made significant purchases in the financial services, auto, capital goods, and telecom sectors.
According to experts, FPIs are expected to continue buying Indian stocks going forward, particularly while they wait for the results of the general election in 2024.