FPIs pump ₹11,631 crore in Indian equities in April, rupee appreciation gives a boost

• Foreign portfolio investors (FPI) pumped ₹11,631 crore in Indian equities in April, emerging as net buyers for the second consecutive month.
• Strong FPI inflows also gave a boost to Indian equity markets – while Nifty50 rose 3.8%, Sensex gained 3.4% during April.
• FPI inflows were aided by a stronger rupee, which appreciated 0.5% against the US dollar during April.

Foreign portfolio investors (FPI) pumped ₹11,631 crore into Indian equities in April, building on the momentum of March and bringing back some cheer to the Indian markets for the second consecutive month.

FPIs accelerated their equity purchases in April, increasing their investments from ₹8,939 crore in March. Despite the IT sector’s weak earnings and sombre outlook for the coming quarters, the benchmark Nifty50 index rose 3.8% in April, making up for most of the losses of 2023 till date.

Some aggressive buying towards the end of April helped boost FPI investments for the month – the last two trading sessions of the month together witnessed FPI inflows of ₹5,379 crore in the equity segment.

Other segments like debt also witnessed an increase in inflows in April. FPIs invested ₹806 crore in bonds, which is once again an increase from March that saw investments worth ₹380 crore.

Stronger rupee brings back FPIs

In April, the rupee appreciated by 40 paise or 0.5% against the US dollar to 81.78, and a further appreciation is possible. “Over the near term, we expect a range of 81.5-82 on spot,” said Anindya Banerjee, vice president, currency derivatives and interest rate derivatives at Kotak Securities.

“An important macro factor that has tilted the FPI approach is the appreciation in rupee. The INR, which had touched a low of 82.94 to the dollar in late February this year, has now appreciated to 81.75,” said VK Vijayakumar, chief investment strategist, Geojit Financial Services.

The markets have seen a much-needed boost thanks to healthy FPI inflows. While the Nifty50 has gained 3.8% in April, the Sensex is up 3.4%. So far in 2023, the Nifty50 is down by just 0.7%, while the Sensex is nearly flat.

Robust quarterly performance by Indian banks also pushed the markets up – the Nifty Bank index gained nearly 6% in April. In contrast, the Nifty IT index was down 3.2% amidst weak performances by Indian IT majors Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies.

All sectoral indices except the IT index closed April in the green, with realty, PSU bank and auto indices emerging as the top gainers.


Source: NSE

FPIs still net sellers so far in 2023

Despite the healthy increase in the pace of investments, FPIs are still net sellers in 2023 so far, with their net equity outflows standing at ₹13,576 crore this year.

On the other hand, domestic institutional investors (DIIs) have continued to remain steadfast in their investments, pumping in ₹2,217 crore during April. In 2023 so far, DIIs have ploughed ₹85,416 crore into the Indian markets.

However, going forward, FPI flows are likely to remain positive, according to Vijayakumar. “India’s current account deficit is declining and if this trend continues, the rupee may appreciate further. FPIs are likely to bring more inflows into India in this context,” said Vijayakumar.

A softer dollar should benefit the rupee, but other macroeconomic factors will also play a role. It remains to be seen if the rupee can maintain its strength against the dollar since that will also have an impact on FPI flows.

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