FIIs pump $3 billion into Indian equities over the past 10 sessions despite US Fed rate hikes

Foreign institutional investors (FIIs) have bought Indian equities worth nearly $3 billion over the past 10 sessions, even as the US Federal Reserve has increased the policy rates to tackle inflation.

As per the data available on the NSDL, FIIs purchased $2.74 billion in Indian equities between October 20 and November 2. So far in November, FIIs have poured in Rs 6,160.11 crore into Indian markets, data from National Stock Exchange showed.

The FII buying comes despite US Federal Reserve’s continuous increase in interest rates to fight soaring inflation in the country. On November 2, Fed Chairman Jerome Powell announced the fourth consecutive 75 basis point interest rate hike. The benchmark federal funds rate is now in the range of 3.75% to 4%.

Powell also struck away any hopes of the central bank pivoting towards a more dovish outlook on interest rates amid rising fears of a recession. However, the US Federal Open Market Committee (FOMC) indicated that the central bank will lower the quantum of interest rate hikes going ahead.

So, what is attracting FIIs to the Indian equity markets?

Domestic markets have turned positive after gaining traction in the second half of October. On November 7, the benchmark index Sensex reclaimed the key 61,000-point mark while the Nifty hit the 18,000-mark.

Positive global cues, FII buying, as well as strong domestic fundamentals triggered gains in Indian markets.

Strong September quarter earnings by domestic companies and favourable growth in key macro indicators has fuelled optimism. Meanwhile, expectations of the US Fed going slow on the pace of interest rate hikes has augured well for the markets. All this may have led to returning of foreign investors in Indian markets.

India’s macroeconomic fundaments seem to have shown resilience amid global uncertainty. The Index of Industrial Production (IIP) grew 7.9% in September, while the manufacturing PMI rose modestly to 55.3 for October. GST collection in October hit the second highest number ever at Rs 1.52 lakh crore.

Another factor that could be auguring well for India is it remains relatively shielded from recessionary fears. India is expected to be among the fastest-growing major economies this fiscal despite the geopolitical turbulence. The country’s economic growth is projected at 7.0% for 2022-23.

Banking on strong macro numbers, coupled with decent earnings growth, foreign investors are likely to find a sweet spot in Indian equities going ahead.

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