Record FPI Purchases Drive Indian Equities to All-Time Highs in December

Foreign Portfolio Investors (FPI) made historic monthly acquisitions of Indian equities, reaching 661.35 billion rupees ($8 billion) in December, according to National Securities Depository data. This surge catapulted India’s Nifty 50 and Sensex benchmarks to fresh record highs. The first half of December alone witnessed a record fortnightly purchase of shares worth 427.33 billion rupees, attributed to lower U.S. bond yields and expectations of Federal Reserve interest rate cuts.

Factors Driving FPI Interest

1. Robust Economic Indicators: Faster-than-expected quarterly GDP growth prompted the Reserve Bank of India to revise upwards its fiscal 2024 growth forecast.
2. Policy Continuity: State election results signaled policy continuity in 2024, adding to the positive sentiment.
3. Global Economic Conditions: Expectations of moderating global inflation and interest rates in 2024 increased India’s attractiveness for FPIs.

Market Impact

The Nifty 50 registered gains of 5.52% in November and a subsequent climb of 7.94% in December, concluding 2023 with the best monthly performance since July 2022. The final two months of 2023 saw the highest annual FPI purchases on record, with a notable 291.68 billion rupees directed towards high-weightage financials, propelling the financial services index 7.14% higher to a new all-time high.

Important Questions Related to Exams

1. What was the total value of foreign portfolio investors’ (FPI) purchases in Indian equities in December, and how did it impact the Nifty 50 and Sensex benchmarks?
2. Identify and explain two key factors that drove the surge in FPI interest in Indian equities during the first half of December, according to National Securities Depository data.

Please provide your answers in the comment section!!