It’s a Sweet November for FPI Inflows

Economic indicators are still flashing red and share valuations are pricey, but they haven’t stopped global fund managers from pumping record money into Indian equities.

Net purchases of shares by foreign investors were worth almost ₹69,500 crore in November — the highest in a month — as breakthroughs in Covid-19 vaccines, an increase in India’s weight on MSCI indices and Joe Biden’s victory in the US elections reinforced their appetite for riskier emerging market assets. Fund managers and strategists expect flows into emerging markets to continue in December, although at a relatively moderate pace, with the dollar and other developed market currencies expected to remain under pressure.

This is on account of easy monetary policies followed by the US Federal Reserve and other central banks.

Indian stocks received the highest foreign portfolio investor flows among major Asian markets, excluding China, which does not publish the data, in November, helping the Nifty index sprint from the 12,000 mark to 13,000 in only 14 trading sessions during the month.

At 21.4 times, the Nifty’s 12-month forward PE is trading at an all-time high and at a 39% premium to its 15-year average.

The addition of Indian stocks to MSCI indices partly sparked fresh flows from global funds. FPIs bought shares worth ₹7,713 crore on Friday as against the daily average of ₹3,600 crore in November.

The National Stock Exchange’s cash segment hit a lifetime high turnover of ₹1.47 lakh crore in a single day on Friday.

Net flows into emerging markets so far this year are still a negative $28 billion. India has received $15 billion so far this year.

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