Foreign portfolio investors (FPIs) have been paying close attention to net sellers in Indian markets since they reduced their buying momentum this month with the start of the new financial year 2024-25 (FY25). This follows reporting strong inflows in the previous financial year. However, experts doubt that these capital inflows will continue, as US bond yields are likely to remain high due to a sharp rise in underlying US inflation.
REITs unloaded ₹6,304 crores of Indian shares and the total outflow amounts to ₹13,144 crore as of April 26, taking into account debt, hybrids, debt-VRR and equity, according to data from National Securities Depository Ltd (NSDL). Total debt outflows amount to ₹10,640 crores so far this month.
“In April and until the 26th FPI, the sale of shares amounts to ₹6,304 million. On the spot market, during this period, sales of shares amounted to ₹20,525 million. In the debt market, there is also a trend of resumption of sales,” said Dr VK Vijayakumar, chief investment strategist at Geojit Financial Services.
“The trigger for this resumption of REIT sales, both in equities and debt, is the sustained rise in US bond yields. The yield on 10-year bonds now stands at around 4.7 per cent, which is extremely attractive for foreign investors,” added Dr VK Vijayakumar.
REIT activity in Indian markets
Pumped FPIs ₹35,098 crore in Indian stocks in March – the highest inflows recorded in the first three months of 2024. FPI outflows initially declined in February until becoming net buyers at the end of the month, despite bond yields raised Americans. The inflow into Indian stocks amounted to ₹1,539 crores and investment in debt market increased to ₹22,419 crores in February in addition to ₹19,836 crore purchased in January.
The inclusion of government bonds in the JPMorgan and Bloomberg debt indices has particularly triggered inflows of foreign funds into debt markets. REITs became massive sellers in January 2024, ending their buying streak, while investments saw a sharp rise in December 2023 after reversing their three-month selling streak in November 2023.
However, capital flows intensified in December due to strong global signals after the US Federal Reserve signaled the end of its tightening cycle and raised expectations for a rate cut in March 2024. This led to a collapse in US bond yields and triggered inflows of foreign funds into emerging markets. like India.
For the entire calendar year 2023, REITs have purchased ₹1.71 lakh crore of Indian stocks and the total inflow stands at ₹2.37 lakh crore considering debt, hybrid, debt-VRR and equity, according to NSDL data. The net investment of FPIs in the Indian debt market stands at ₹68,663 crores in 2023.
Overall, only four months in 2023 – January, February, September and October – saw net FPI outflows from Indian stocks. May, June and July each saw REIT inflows in excess of ₹43,800 billion.
Disclaimer: The views and recommendations expressed above are those of individual analysts or brokerage firms, and not of Mint. We advise investors to seek advice from certified experts before making any investment decisions.
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