IFIs are expected to focus primarily on sectors with strong growth potential. | Representation
According to data from the National Securities Depository Limited (NSDL), foreign institutional investors bought over $1.6 billion worth of Indian stocks between August 16 and 27. During this period, both the benchmark indices (Sensex and Nifty) gained over 1.4%, while the BSE MidCap and SmallCap indices gained 1.8% and 2.4%, respectively.
This surge in IFI purchases was largely driven by block trades involving companies such as Ambuja Cement, Tata Tech, GMR Airports, Zomato, PNB Housing and Nykaa. Collectively, these transactions were valued at around Rs 22,000 crore, according to NSDL data cited in a Moneycontrol report.
Other factors contributing to the buying spree by foreign investors include speculation surrounding a possible interest rate cut by the US Federal Reserve, stabilisation of the Indian rupee and positive sentiment regarding India’s growth prospects. Analysts predict that this trend is likely to continue in light of India’s strong economic performance and stable macroeconomic indicators.
The first half of August saw the largest outflow of foreign direct investment funds
Unlike the second half of the month, the first half of August (August 1-14) saw the largest capital outflow from India among emerging markets. Foreign investors sold shares worth around $2.12 billion during this period, leading to declines of over 1% in the Sensex and Nifty indices, and declines of 1% and 1.3% in the BSE MidCap and SmallCap indices, respectively.
In August, foreign investors also withdrew $1.14 billion from Japan, $1.6 billion from South Korea, $1.17 billion from Taiwan and smaller amounts from Thailand and Vietnam. However, they invested $1.35 billion in Brazil, $899 million in Indonesia, $278 million in Malaysia and $121 million in the Philippines.
High volatility in global markets
Market observers note that global markets are experiencing significant volatility due to weak US economic data, fears of a US recession and uncertainty surrounding possible interest rate cuts by the Federal Reserve. As a result, foreign investors are expected to focus primarily on sectors with strong growth potential and companies with solid fundamentals.
First published: August 29, 2024 | 10:50 a.m. IS
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