FPIs buy Indian shares for fifth month in July, lift benchmarks to fresh highs

This is the highest monthly FPI inflows since August 2022.

Foreign portfolio investors (FPIs) bought Indian shares worth 466.18 billion rupees ($5.63 billion) on a net basis in July, data from the National Securities Depository Ltd (NSDL) showed on Friday.

This is slightly less than inflows of 471.5 billion rupees in June 2023, the highest monthly FPI inflow since August 2022.

Sustained FPI inflows have powered the uptick in the blue-chip Nifty 50 and S&P BSE Sensex, driving the benchmarks to record highs. The Nifty 50 rose 2.94 per cent in July.

Also Read: Sensex climbs 300.1 points; Nifty advances 105.9 points

Between March and July, FPIs have been net buyers of Indian equities in each of the five months, purchasing shares worth 1,553.08 billion rupees and triggering a 14.15 per cent rise in Nifty 50 index.

"The rally to record highs in July was predominantly driven by foreign inflows," said Samrat Dasgupta, CEO, Esquire Capital Investment Advisors.

"If you see local mutual funds, there have been substantial profit bookings over the last few months."

Analysts attributed strong macroeconomic fundamentals, steady earnings as well as concerns over recovery in China as key drivers of foreign inflows into India.

Earlier in the week, global brokerage Morgan Stanley upgraded its view on India to "overweight" from "equal weight" and termed it the most-preferred among emerging markets (EMs) on macro-stability and positive earnings outlook.

What FPIs bought in July

FPIs purchased equities worth 115.14 billion rupees in the financial services sector in July, after buying 192.29 billion rupees worth of shares in June. FPIs were also net buyers in the sector in April and May.

"Earnings growth in banks remained steady and asset quality continued to improve, while non-banking financial companies (NBFCs) demonstrated healthy disbursement momentum," according to analysts at Motilal Oswal Financial Services in their interim review of June quarter numbers.

The revival in FPI interest in financials follows outflows of 299.93 billion rupees of shares in the sector in fiscal 2023.