Record monthly FPI buying in December drives Nifty 50 to record highs

FPIs bought shares worth 427.33 billion rupees in the first half of December, marking a fortnightly record, driven by lower U.S. bond yields amid expectations of interest rate cuts by Federal Reserve

Foreign portfolio investors (FPI) made record monthly purchases of Indian equities totalling 661.35 billion rupees ($8 billion) in December, National Securities Depository data showed.

The record buying propelled India's stock benchmarks, Nifty 50 and Sensex, to fresh all-time highs.

FPIs bought shares worth 427.33 billion rupees in the first half of December, marking a fortnightly record, driven by lower U.S. bond yields amid expectations of interest rate cuts by the Federal Reserve.

Faster-than-expected quarterly gross domestic product (GDP) growth, prompting the Reserve Bank of India to raise India's fiscal 2024 growth forecast, coupled with state election results signalling policy continuity in 2024, further fuelled FPI interest in Indian equities, analysts said.

FPIs had turned net buyers in November following two consecutive months of selling. With gains of 5.52% in November and a subsequent climb of 7.94% in December, the Nifty 50 concluded 2023 with best monthly gains since July 2022.

The surge in FPI buying in the final two months of 2023 also led to the highest annual purchases on record for the year.

"With global inflation and interest rates expected to moderate in 2024, India's stable policy environment and resilient economy could attract meaningful flows," said George Thomas and Christy Mathai, fund managers at Quantum Asset Management Company.

A record 291.68 billion rupees of inflows, constituting 44.10% of total FPI buying in December, were directed towards high-weightage financials, propelling the financial services index 7.14% higher to new all-time high.

"The rising interest of FPIs in financial services in November and December explains the resilience of the segment," said VK Vijayakumar, chief investment strategist at Geojit Financial Services.