Foreign investors buy Indian equities in Dec first half even as stocks slip

Foreign investors have latched on to domestic equities between Oct. 15 and Dec. 15 and are on course to become net buyers for two consecutive months

Foreign portfolio investors bought Indian shares worth 90.17 billion Indian rupees ($1.09 billion) in the first half of December, despite the country's benchmark indexes coming off record high levels on hawkish commentary from global central banks, data showed.

The Nifty 50 fell 1.83% during Dec. 1-15, according to Refinitiv data.

Between Nov. 16 and Nov. 30, when benchmarks rose to record high levels, foreign fund inflows logged 73.5 billion rupees.

Foreign investors have latched on to domestic equities between Oct. 15 and Dec. 15, and are on course to end the year as net buyers for two consecutive months.

This is a pivot from the first six months of 2022, when foreign portfolio investors (FPIs) sold off Indian equities amid geopolitical concerns, a rise in commodity costs and the beginning of rate hike cycles by central banks the world over, before turning buyers for the first time this year in July.

"Foreign investor confidence has returned to India after a volatile start to 2022," said Deven Choksey, managing director at KRChoksey Holdings, adding that outflows in the first half of the year were mainly due to the rise in crude oil prices.

YEAR-END SHOPPING

While foreigners continued buying stocks, their preferences changed in December.

The real estate sector saw the most FPI inflows during Dec. 1-15 at 31.50 billion rupees. Financial services and information technology stocks witnessed outflows of 2.09 billion rupees and 13.14 billion rupees, respectively, according to data from the National Securities Depository.

"The interest in the real estate sector is due to the fact that it is linked more to the domestic economy, which has shown encouraging signs," said G Chokkalingam, founder and head of research at Equinomics Research and Advisory.

The sharp uptick in asset prices in key markets such as Mumbai, helped in attracting foreign fund flows, he added.

On the other hand, outflow in information technology was largely driven by a strong correlation with U.S. and European economies, analysts said.

Dow Jones fell 4.00%, S&P 500 lost 4.52% and tech-heavy NASDAQ shed 5.73% in the first half of December. The FTSE also lost 1.94%, while the CAC fell 3.2% during the same period.

There were inflows of 26.76 billion rupees for consumer services stocks and 26.49 billion rupees for shares of fast-moving consumer goods companies.

The FPI interest in sectors was mostly directly proportional to the sectoral moves.

Real estate, consumer and metals and mining, all of which witnessed maximum inflows, rose 0.80%, 0.02% and 2.20%, respectively.

Information technology and oil and gas fell 4.29% and 1.00%, respectively.

Only healthcare stocks bucked the trend, with the index falling despite seeing inflows worth 12.83 billion rupees.

($1 = 82.8240 Indian rupees)

 

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Janane Venkatraman and Shounak Dasgupta)