- FPIs invested around ₹16,600 crore in Indian equities in the first half of August, with Auto and Financial Services attracting strong buying while Telecom and Power remained under pressure.
- Auto sector saw a sharp reversal with ₹4,393 crore inflows after ₹4,574 crore outflows in July, indicating a significant shift in FPI sentiment.
- Financial Services attracted ₹6,950 crore, making it the highest among sectors during this period.
- Telecom and Power continued to see outflows of ₹3,322 crore and ₹2,216 crore respectively, reflecting ongoing investor caution.
- FPIs sold heavily in Indian equities for four consecutive months before July, indicating a prolonged period of foreign investor withdrawal.
- Jio BlackRock noted that the return of FII inflows in July suggests that the worst of the foreign investor withdrawal from Indian markets may be behind.
Foreign portfolio investors (FPIs) returned to Indian equities in August, investing ₹16,600 crore between August 1 and 15, marking a significant turnaround after four months of heavy selling.
The auto sector attracted ₹4,393 crore in inflows, reversing a previous trend of outflows, while financial services received ₹6,950 crore, making it the largest beneficiary during this period.23
Telecom and power sectors, however, continued to face challenges, with outflows of ₹3,322 crore and ₹2,216 crore respectively.45
This shift in investment patterns suggests a growing confidence among foreign investors, as the Nifty Auto index recently broke out of a three-month consolidation range, indicating bullish momentum.
Historically, September has been a favorable month for the auto sector, with the Nifty Auto index closing higher in 16 of the last 20 years.
Financial services also have a strong historical performance in September, closing higher in 12 of the last 20 years.
Despite the positive inflows, cumulative outflows from the auto sector over the past five months remain high at ₹35,739 crore, highlighting the volatility in investor sentiment.
Domestic investors have played a crucial role in stabilizing the market, absorbing some of the impacts of foreign selling.
India's equity valuations have become more attractive, with the 12-month forward price-to-earnings ratio returning to its 10-year average of around 20 times.
However, risks remain, including declining consumer confidence and potential volatility in global equity markets.
“The auto sector's reversal follows five months of cumulative outflows totaling Rs 35,739 crore, while Financial Services inflows of Rs 6,950 crore come after Rs 12,303 crore of outflows between March and May. Jio BlackRock notes that similar weak foreign flow periods have often preceded recoveries in capital flows and equity markets.”
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