The brightness that has returned to the Indian stock market last week has once again brought glow on the faces of investors. The effect of the market being in the ‘green mark’ was that the assets i.e. market cap of 7 companies out of the top 10 companies of BSE increased by more than Rs 96,000 crore. But amidst this boom, the real news has come from the foreign front. Foreign Portfolio Investors (FPIs), who seemed to be upset with the Indian market for some time, have now returned.
November figures show that foreign investors have started loosening their purse strings, but their strategy has changed a bit this time. They are investing money, but not directly in shares. Let us understand what is this new trend of foreign investors and what effect it is going to have on your pocket and the health of the market.
Kept distance from shares, still invested Rs 4,000 crore in the market
The figures for the month of November are very interesting. According to the latest data released by Central Depository Services Limited (CDSL), foreign investors (FPIs) have made a total net investment of Rs 4,114 crore in the Indian capital market in November. This is the second consecutive month when foreign investors have invested money in the market instead of withdrawing it. This is a good sign for the market.
But there is a catch here which is important to understand. When we say ‘market’, it includes both equity market and debt market. In November, foreign investors withdrew Rs 3,765 crore from equity i.e. direct shares. That means they sold more shares and bought less.
Then how did this ‘net inflow’ or net investment become positive? The answer is- debt market and mutual funds. Foreign investors bought heavily in the debt market (bonds etc.) in November and invested Rs 4,674 crore. Apart from this, he also invested Rs 3,098 crore in India through mutual funds. Investment of about Rs 103 crore also came in hybrid instruments. This shows that foreign investors are trusting India, but they are currently preferring to invest money through safe routes (like debt funds) rather than directly investing in shares.
7 months of selling, 4 months of buying, what’s going on?
If we go back a little and look at the accounts of the entire year (calendar year), the picture becomes clearer. So far this year, the attitude of foreign investors has been a bit fluctuating. Out of 11 months of the year, he was a ‘net seller’ (i.e. withdrew money) for 7 months and was a net buyer only for 4 months.
Overall, so far this year, FPIs have made a huge withdrawal of Rs 45,251 crore from the Indian market. The biggest hit in this has been on the equity market, from where they withdrew a total of Rs 1,37,492 crore. On the contrary, he has made a huge investment of Rs 87,250 crore in the debt market. This makes it clear that amidst global uncertainties, foreign investors are considering Indian bonds and debt instruments as more safe and profitable than Indian shares. At the same time, a total positive investment of Rs 3,101 crore has been seen through mutual funds.
Reliance-Tata companies are back in business
Despite this mixed attitude of foreign investors, the Indian market showed tremendous strength last week. The country’s biggest companies benefited from the improving market mood. A total increase of Rs 96,201 crore was recorded in the market cap of 7 out of the top 10 companies of BSE Sensex. This means that investors have maintained their trust in these big companies.
However, the week was not good for everyone. Three of the top 10 companies also suffered losses, due to which their market cap decreased by Rs 43,999 crore. But overall, buyers had the upper hand in the market. When the valuation of big companies increases, it also provides confidence to small and medium investors.
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