FPIs have withdrawn around ₹8,750cr from Indian equities this June
What's the story
Foreign Portfolio Investors (FPIs) made a weak start to the first week of June in the Indian stock market.
According to data released by the National Securities Depository Limited (NSDL), FPIs withdrew a total of ₹8,749 crore from Indian equities between June 2 and June 6.
The withdrawal was driven by global uncertainties and cautious investor sentiment.
Market response
RBI's unexpected rate cut boosts investor confidence
Despite the outflow, Friday witnessed a sharp turnaround after the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) announced an unexpected 50 basis points rate cut.
The repo rate was lowered to 5.5%, significantly boosting investor confidence.
Market experts believe this aggressive move will boost India's economic momentum and improve demand conditions in the country.
Investment outlook
FPIs expected to increase investments in coming months
With inflation remaining within RBI's comfort zone and the central bank signaling a pro-growth stance, FPIs are likely to ramp up their investments in the coming months.
Ajay Bagga, a banking and market expert, said June's first week saw a "roller coaster in terms of FPI flows."
He added that India's strong macroeconomic indicators and expectations of further rate cuts could make India an attractive investment destination for FPIs despite high stock market valuations.
FPI performance
May recorded highest net FPI inflows this year
Notably, May had recorded the highest net foreign portfolio investment inflows of ₹19,860 crore this year.
This positive trend in FPIs is a stark contrast to the previous months when they had sold shares worth ₹3,973 crore in March and ₹78,027 crore and ₹34,574 crore in January and February, respectively.