In April, foreign portfolio investors (FPIs) observed strong inflows into financial services and auto stocks, which together accounted for #9,677 crore of inflows.
In April, foreign institutional investors purchased Indian equities net, continuing their purchases from last month. In total, 16 out of 24 sectors experienced inflows during the month, whereas five sectors experienced outflows and one sector remained flat. Their net investments in Indian equities totalled 11,629 crore.
This month, net equity investments have reached 14,703 crore, continuing the trend of positive FPI flows.
According to VK Vijayakumar, chief investment strategist at Geojit Financial Services, India outperformed most markets in April.
After experiencing high volatility in March, Indian equity markets exploded in April. The Nifty50 index surged 4.1%, while the Sensex gained 3.6%. With gains of 4.4%, the financial services index outperformed the Nifty50 index, while the Nifty Bank index surged 6.5% and the Nifty Auto index soared 7.7%.
Strong economic data, including GST collections and manufacturing purchasing manager’s index (PMI), also contributed to the strong FPI inflows.
Manufacturing PMI hit a four-month high of 57.2 in April, the highest since the rollout of the indirect tax regime. GST collections reached nearly two lakh crore, the highest since the rollout of the indirect tax regime.
In Vijayakumar’s view, foreign portfolio investors are likely to continue buying in India due to the appreciation of the rupee and good Q4 results.
IT sectors remain a source of concern for FPIs
FPIs remain wary of the Indian IT sector, resulting in a second consecutive month of outflows of $4,908 crore.
In the first half of April, FPIs invested 1,002 crore in the IT sector, but turned bearish once Q4 earnings began to flow in, resulting in an outflow of 5,910 crore. There have been 11,886 crore withdrawals from the IT sector by foreign investors so far in 2023.
In April, the Nifty IT pack fell 3.5% while the broader Nifty50 index gained 4.1% due to mixed performance in Q4.
Infosys, LTI Mindtree and Tech Mahindra are among the top losers in the Nifty IT index, while TCS managed to remain positive.
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Analysts remain broadly optimistic about Indian equity markets despite weakness in the IT sector. As a result of double-digit earnings growth, Goldman Sachs expects the Nifty50 to reach 20,000 in the next 12 months, while Morgan Stanley has upgraded Indian equity markets to ‘equal weight’ due to a robust economy and a reasonable valuation.
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