Source: Mint News
New Delhi, (Foreign Portfolio Investment) flowing into the Indian stock markets has surged around ₹3,346.94 cr (484.65 million USD) in the week ended June 14, compared with the previous week. The rise in investment follows the RBI’s unexpected summer gift of a repo rate cut, which drove renewed bullish sentiment in the markets. The new information source was through NSDL (National Securities Depository Limited).
RBI Rate Cut Boosts Investor Sentiment
On June 6, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) cut the repo rate by 50 bps to 5.5% in an unexpected decision that improved market sentiment and provided positive market bias. During the following week, from June 9 to June 13, foreign investors started to put money back into Indian equities.
The decision to lower rates seemed to lift market sentiment for the first three trading sessions, leading to moderate FPI buying as investors took the news as a positive benchmark for the economy, expecting that the rate cut would lower businesses’ cost of capital and in turn lift economic activity altogether.
Geopolitical Tensions Impact the Marketplace
However, this positivity did not last long. On the last trading day of the week, Friday, FPIs withdrew ₹3,275.76 crore from Indian markets. This exodus was mainly caused by the conjuncture of the rising geopolitical tensions between Israel and Iran. Such developments make investors jittery. This significant outflow brought down the net investment for the week to ₹3,346.94 crore.
In times of global tension, the international investment community tends to move its money into a safe asset class like gold, which in turn pushes capital away from riskier markets such as India, and ultimately leads to a spike in outflow, as we witnessed on Friday, shrinking the gain for the week.
Net Outflows Continue in June
Despite this week’s inflow of ₹3,346.94 crore, June as a whole is still experiencing foreign investors pulling money out. So far this month, FPIs pulled ₹5,402 crore out of the Indian stock markets.
It appears that while the RBI rate cut provided a temporary effect, the lingering global uncertainty and continued lack of commitment by FPIs have kept participation low.
Let’s look back on previous months.
While June has had a weak trend, May had good inflows, and foreign investors put in ₹19,860 crore, which is the best month of the year so far. However, earlier in the year, the trend was negative overall:
- FPIs pulled out ₹3,973 crore in March.
- FPIs pulled out ₹34,574 crore in February.
- FPIs pulled out the most amount of money in January – ₹78,027 crore.
