After becoming net buyers last month, foreign investors turned aggressive buyers of Indian stocks and invested Rs 22,452 crore in the first two weeks of August amid easing inflation fears .
This was far more than a net investment of nearly Rs 5,000 crore by foreign portfolio investors (REITs) during the whole month of July, according to custodian data.
REITs had turned net buyers for the first time in July, after nine consecutive months of massive net outflows, which began in October last year.
Between October 2021 and June 2022, REITs sold Rs 2.46 lakh crore in Indian stock markets.
Going forward, foreign fund inflows are expected to improve in emerging markets as worries about rising inflation and central bank monetary policy tightening wane, said Shrikant Chouhan, Head – Equity Research (Retail), Kotak Securities.
India’s retail price inflation fell to 6.71% in July due to moderating food prices, but remained above the Reserve Bank’s 6% comfort level, according to official figures. for the seventh consecutive month.
US inflation slowed from a 40-year high in June to 8.5% in July due to lower gasoline prices, indicating that the US Fed may be less aggressive in raising rates of interest.
“As long as energy prices stay low and there are no surprises from the war zone, foreign flows are likely to continue,” said Vijay Singhania, president of TradeSmart.
Brent futures, the global oil benchmark, are hovering around $98 a barrel.
According to data from custodians, REITs injected a net amount of Rs 22,452 crore into Indian stocks from August 1-12.
Sentiment in the equity market has turned bullish on continued REIT buying.
“The depreciation of the dollar (the dollar index fell from over 109 at the end of July to around 105.26 on August 12) is the main driver of capital flows to emerging markets,” said VK Vijayakumar, chief strategist investments at Geojit Financial Services.
India is a preferred destination as the country has the best growth prospects among the world’s major economies, he added.
Kotak Securities’ Chouhan attributed the positive inflow to waning concerns about rising inflation. Also, decent Q1 results helped market sentiment.
Falling energy prices and slowing inflation improved sentiment, which helped buy REITs, TradeSmart’s Singhania said.
REITs have become buyers in sectors such as automotive, capital goods, consumer packaged goods and telecommunications. They continued to sell in IT.
Additionally, REITs paid a net amount of Rs 1,747 crore in the debt market during the period under review.
Apart from India, flows were positive in Indonesia, South Korea and Thailand, while they were negative in the Philippines and Taiwan during the period under review.