FPI inflows hit 10-month high in June, power Indian shares to record highs

Foreign portfolio investor (FPI) inflows in Indian equities hit a 10-month high of 452.86 billion rupees ($5.49 billion) in June, data from the National Securities Depository Ltd (NSDL) showed on Thursday.

Over three-fourths of the purchase, aggregating 340.25 billion rupees, occurred in the second half of June, propelling India's stock benchmarks to record highs by the end of the month.

Both the Nifty 50 NIFTY and the S&P BSE Sensex SENSEX rose more than 3% last month.

So far FPIs were net buyers in each of the three months of fiscal 2024, adding equities worth over 1 trillion rupees. The Nifty 50 rose nearly 11% in the June quarter, which was "entirely supported by foreign inflows," analysts at Goldman Sachs said in a note.

"The pause in the Fed's rate hike cycle, strong macro-economic outlook, stable corporate earnings, concerns over recovery in China have aided flows into Indian markets," said Pratik Gupta, CEO and co-head at Kotak Institutional Equities.

WHAT FPIs BOUGHT IN JUNE

FPIs bought equities worth 192.29 billion rupees in June in financial services companies after selling 299.93 billion rupees of shares in the sector in fiscal 2023.

They bought financial stocks worth 176.71 billion rupees in May and 76.90 billion rupees in April.

Auto, capital goods and consumer durables also witnessed interest from FPIs throughout June, while buying emerged in power and metal stocks in the second half of the month.

Persistent inflows powered financials CNXFINANCE, auto CNXAUTO and fast-moving consumer goods CNXFMCG indexes to all-time highs last month.

The sell-off in information technology stocks persisted, although the selling moderated in the second half of June.

The divergence in performance between the two high-weighted sectors - IT and financials - will persist, according to domestic brokerage firm Motilal Oswal Financial Services.

IT earnings are likely to remain subdued in the second half of 2023 amid concerns over an economic slowdown in key markets of the United States and Europe, three analysts said.

($1 = 82.4562 Indian rupees)