A first in 6 months: Markets fall a chance to buy dips, FPIs turn buyers in April so far

FPIs also put in Rs 1,403 crore in the debt markets during the period under review, after pulling out a net Rs 8,705 crore in the last two months (February and March), according to NSDL data. With this, total FPI investment is Rs 8,276 crore in April so far.

Foreign investors withdrew a net Rs 1.4 lakh crore from equities in the entire FY22. Despite the FPI pullout, the NSE Nifty rose 19 per cent in the same period, on the back of support from domestic institutions and retail investors.

Analysts said FPIs have now factored in the US Federal Reserve move to tighten the monetary policy. The US central bank has hiked interest rates and indicated withdrawal of liquidity from the system to fight inflation. FPI outflows were largely on the back of anticipation of rate hike by the US Federal Reserve, and later, due to the deteriorating geopolitical environment following Russia’s invasion of Ukraine.

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However, analysts said it would still be slightly premature to call it a change in the FPI trend and it will be prudent to watch how the scenario unfolds over the next few weeks or months to get more clarity.

The inflow indicates that foreign investors are almost done with the recalibration exercise of their portfolios owing to the current scenario. Also, the recent correction in the equity markets have opened investment opportunities.

The inflow indicates that foreign investors are almost done with the recalibration exercise of their portfolios owing to the current scenario. Also, the recent correction in the equity markets have opened investment opportunities, which FPIs would have sought as a good entry point, he added.

FPIs had pulled out over Rs 50,000 crore in the month of March. As a result, forex reserves recorded the highest ever fall for the week ended April 1, sliding by $11.173 billion to $606.475 billion as the currency came under pressure due to geopolitical developments.

The steep fall in the foreign exchange reserves was because of a decline in the core currency assets, which declined by $10.727 billion to $539.727 billion. Typically, the RBI intervenes in the market to reduce volatility in the currency market by selling from its reserves kitty.

Shrikant Chouhan, head-equity research (retail), Kotak Securities, said FPIs flows are expected to remain volatile in the near term given the headwinds in terms of elevated crude prices and inflation, among others.