After three months of selling spree, foreign investors have turned net buyers in the first week of January by infusing Rs 3,202 crore in Indian equities, as correction in markets provided them good buying opportunity.
Going forward, FPIs flows will remain volatile on the expectation of the US Fed rate hike, rising concerns over the Omicron variant and elevated inflation levels, experts said.
The latest inflow came after witnessing a net outflow of Rs 38,521 crore during October-December 2021. Before that, foreign portfolio investors (FPIs) had made a net investment of Rs 13,154 crore in September last year.
According to data available with the depositories, FPIs have infused a net sum of Rs 3,202 crore in the Indian equities during January 3-7.
Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said, "Intermittent buying by FPIs could be attributed to the correction in the markets interim, which would have provided them some good buying opportunity".
He further said that FPIs continue to be cautious in their investment approach in the backdrop of a sharp surge in the coronavirus pandemic across the globe, including India.
Although the world has the experience of battling two waves in the past, the newer variant - Omicron - continues to pose a concern. Moreover, a sharp rise in cases would also result in lockdown being imposed to curb the pandemic spread, which can again have an impact on economic growth, he added.
Apart from equities, FPIs were net buyers in the Indian debt market as well, but marginally. Through the week, they bought net assets worth Rs 183 crore.
FPIs flows into the Indian debt markets have been sporadic for a long time with no clear direction. Last year, they were net sellers to the tune of Rs 1.04 lakh crore.
VK Vijayakumar, Cheif Investment Strategist at Geojit Financial Services, said a major concern of FPIs is the tightening monetary stance in the US, with the 10-year US bond yield rising that can trigger selling in the emerging markets.
Since the Indian market is resilient, and retail and domestic institutional investor flows are strong, FPIs are unlikely to press sales unless the market rises sharply, he added.
"With the expectation of US Fed rate hike, rising concerns of Omicron and elevated inflation levels, we expect FPI flows to emerging markets, including India, will remain volatile," Shrikant Chouhan, Head - Equity Research (Retail), Kotak Securities, said.
According to Srivastava, intermittent corrections in the markets might trigger some buying from FPIs. However, with valuations continuing to be at elevated levels, along with other concerns, India may not be as attractive for them as has been the case sometime back.