FPIs smash records in Nov: Highest net inflows in a calendar month ever

Previously, September 2010 had seen the record for highest FPI flows in dollar terms. In rupee terms, August this year had seen record flows of Rs 45,637 crore

The floodgates have truly opened in November, as foreign portfolio investors (FPI) have poured in over $7.4 billion, or Rs 54,573 crore, into stocks this month — the highest-ever for a month both in local currency and US dollar terms. And, they may not be done just yet with four more trading sessions to go.

The previous record for flows in dollar terms was seen in September 2010. In rupee terms, this August had seen record flows of Rs 45,637 crore, data compiled by BS Research Bureau shows. The sharp inflows have catapulted the benchmark Sensex and Nifty indices 12 per cent this month to new lifetime highs.

Weakness in the dollar, optimism around the US election results and progress of Covid-19 vaccine trials spurred global investors’ risk appetite.

“Biden’s election is good for Asia and China. Maybe there is a bit of extra optimism regarding India because of the economic and earnings recovery,” said Andrew Holland, CEO, Avendus Capital Alternate Strategies.

Since May, over Rs 1.5 trillion or $20 billion has flown into domestic stocks — the most-ever on a rolling seven months basis.

“There is so much stimulus that is being offered by western governments they have to find places where they can invest. Because fixed-income virtually gives no returns. Indian markets have been doing well. The turnaround in the September quarter results has helped. Some virtually written-off sectors like autos and banks have done very well,” said UR Bhat, director, Dalton Capital India.

Another technical factor that has propelled the flows has been MSCI’s move to increase India’s weighting in its global indices.

Abhiram Eleswarapu, head of equities, BNP Paribas India, says recent inflows have been led by three factors. “September quarter earnings, which relative to expectations, have been among the best in recent memory, with far more companies beating revenue and earnings estimates than is usual. The MSCI announcement of an increased weightage for Indian stocks in its indices, which led to incremental buying by active FPI funds ahead of the event. Lastly, the recent positive Covid-19 vaccine data and the uncertainty around the US elections having lifted — the latter is seen as a positive for Ems, including India.”

The surge in flows has pushed markets into expensive territory. However, investors seem to be paying little heed to valuations.

“The Nifty valuation at about 21x forward P/E is by no means cheap. But valuations have taken the backseat for now, given low bond yields and supportive central banks, both of which we expect to continue. Instead, investors seem to be focusing on incremental data points both globally and locally,” said Eleswarapu.