FPIs inflow hits 9-month high to ₹37,317 crore in May; will robust foreign funds flow drive Nifty to record high?

Foreign portfolio investors (FPIs) continued to buy in Indian equities for the entire month of May as of now. An inflow of ₹37,317 crore has been recorded till May 26th, which is the highest investment in nine months by FPIs. Foreign investors have been buyers across sectors with massive investment pumped in financial services stocks. The trend in FPIs is likely to continue ahead, which does bring a possible case for the Nifty 50 to touch a new record high.

As per the NSDL data, FPIs inflow in Indian equities comes to ₹37,317 crore from May 1st to 26th. This is not just the highest monthly buying of 2023, but also the highest since November last year.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “FPIs have been buyers across sectors. They invested in sectors like automobiles, capital goods, health care, Oil & gas, and telecom. Massive buying was witnessed in financial services, particularly banking.”

Furthermore, Vijayakumar pointed out that the sustained buying by FPIs lifted the Nifty by 2.4% in May. India is among the best-performing markets like Japan, Taiwan, South Korea, and Brazil while other markets, both developed and emerging, are struggling.

In the trading week that ended on May 26th, Sensex climbed by 588.13 points or 0.95% but Nifty 50 outperformed with an upside of 248.75 points or 1.36%.

Currently, Sensex is at 62,501.69 and Nifty 50 at 18,499.35.

Going ahead, Geojit’s expert believes that leading macro indicators in India like GST collections, PMI data, and credit growth suggest a resilient economy that can deliver 6%GDP growth and mid-teen earnings growth in FY 24. The latest CPI inflation print ( 4.7% in April) has come as a shot in the arm for markets. It is a clear indication that interest rates have peaked in India.

In this favourable macro setting, Vijayakumar said, “FPI flows are likely to continue supporting the market.”

The possibility of continued robust buying from FPIs could drive the Nifty 50 to reach high levels.

Vijayakumar said, “A new record high for Nifty is possible. However, there is no scope for a sharp rally since valuations are not favourable at record levels.”

The benchmark Nifty 50 latest historic high is 18,887.60. The short-term outlook for this index is considered to be robust.

There are three more trading sessions left in May month, and the FPIs flow could go up. 

Also, Mitul Shah – Head of Research at Reliance Securities said, “The IMD has reiterated its previous forecast of a normal monsoon (96% of LPA) this year. This augurs well for the agriculture and allied sectors and should help boost kharif output. It will boost farm income and will be a tailwind for overall rural consumption benefitting sectors such as automobiles, fertilizers, agrochemicals, and FMCG. It will also help tame inflation and boost hopes of a dovish monetary policy in 2HFY24.”

Further, as per Stock Edge data, foreign institutional investors (FIIs) have infused around ₹20,606.80 crore in Indian equities so far in May month.

In April month, FPIs inflow stood at ₹11,631 crore. Year-to-date, FPIs are net buyers with an inflow of ₹22,738 crore in Indian equities.

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