Foreign Institutional Investors (FIIs) Boosting Indian Stocks
In the midst of fluctuating global markets, the Indian stock market has witnessed an extraordinary surge in interest from foreign institutional investors (FIIs). This month is shaping up to be a standout period, with FIIs registering net purchases of $3.3 billion in Indian shares. Comparatively, last month’s figure was a modest $873 million. Data from the National Securities Depository Limited (NSDL) offers insights into this shift, revealing that among this month’s investments, $614.2 million was funneled into initial public offerings (IPOs), while $271 million found its way into the secondary market.
IPO Trend: A Shift in Focus?
The recent performance of IPOs has significantly piqued the interest of retail investors, leading to a surge in participation in this segment. Nevertheless, in September, despite the anticipation of 10 IPOs valued at Rs 11,248 crore, FIIs chose to prioritize the secondary market. In the year 2024, FIIs directed $848 crore into India’s equity market, with $720 crore designated for IPOs. Notably, in March, June, July, and September, FIIs were net buyers in the secondary market, consistently purchasing more than they sold during these months. March saw the highest secondary market purchases at $352 crore, followed by July at $312 crore and June at $292 crore.
Why Increased Interest in the Secondary Market?
Kranti Bathini, an equity strategist at Wealthmills Securities, attributes the heightened FII activity in the secondary market to a surge in IPO offerings and significant block deals undertaken by promoters and private equity investors, particularly amid prevailing market volatility. This strategy, characterized by “buying on dips,” enables FIIs to capitalize on low price points. Most IPOs this month were relatively smaller offerings, aside from Bajaj Housing Finance, prompting FIIs to focus on the more established players in the secondary market, particularly in sectors like banking and engineering.
Market Conditions Favoring FII Investments
Market sentiments were previously dampened due to elevated valuations and political uncertainties. However, the situation shifted post the Lok Sabha election results, with subsequent quarterly earnings figures adding to the positive momentum. Additionally, impending announcements regarding potential rate cuts from the U.S. Federal Reserve are enhancing investor confidence. According to Deepak Jasani, Senior Vice President (Retail Research Head) of HDFC Securities, there is a strong possibility that any rate cut announcement could lead global markets, including India’s, to reach new heights temporarily.
Stable Environment for FIIs in India
Analyst Rajesh Palvia from Axis Securities suggests that FIIs are increasingly drawn to Indian markets, viewing them as more stable compared to global counterparts. The robust performance of the Indian economy and stable corporate earnings—along with a lack of substantial negative indicators—contributes to this appeal. Key sectors attracting FII interest include information technology, healthcare, automotive, and fast-moving consumer goods (FMCG).
Conclusion
The renewed focus of FIIs on the Indian stock market underscores a positive shift in sentiment, influenced by both local and international factors. As these trends continue, investors and market participants may find further opportunities for growth and investment within India’s dynamic economic landscape.
