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Foreign portfolio investors (FPIs) are expected to adopt a cautious stance on Indian equities until there is clarity on the recovery in Q3 FY25 earnings and fair market valuations, says a report by Shriram Mutual Funds.
The report highlighted that despite significant activity, FPIs remain wary of the current economic landscape. It said "FPIs are likely to remain cautious on India until there is clarity on Q3FY25 earnings recovery and fair valuations" In 2024, FPIs investment in equities remained positive but it declined around 99 per cent as compared to 2023 and they ended the year on a more cautious note. Data from the National Securities Depository Limited (NSDL) revealed that October witnessed the highest selling by foreign investors, who offloaded equities worth Rs 91,934 crore. In contrast, domestic institutional investors (DIIs) supported the market, purchasing equities worth Rs 89,740 crore during the same period. For the calendar year, DIIs bought equities worth Rs 4.18 lakh crore, while FPIs recorded net sales of Rs 72 crore. The unwavering support of domestic investors has been a key factor in stabilizing the Indian equity market despite external challenges. However, the report also noted that the Indian rupee has faced significant pressure, touching a record low of Rs 85.8 per USD. This depreciation was driven by foreign outflows following China's announcement of new stimulus measures. India's forex reserves have also seen a decline. As per Reserve Bank of India (RBI) data, the reserves fell by USD 4.112 billion in the week ending December 27, bringing the total to USD 640.279 billion. The report highlighted that globally, market participants are closely monitoring the US Inauguration Day on January 20, 2025. Uncertainty surrounding potential policy changes after the Trump administration's tenure could lead to short-term market instability. It said "All eyes on US Inauguration Day on 20th Jan-25, can lead to short-term instability in market after Trump policies". Additionally, disruptions in global supply chains are prompting businesses to front-load their orders, further adding to market volatility. The combined effect of these domestic and global factors highlights the need for cautious optimism in navigating the markets in the coming months. (ANI)
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