Foreign inflows lift Indian stocks' dollar returns above rupee gains as currency rebounds

Résumé détaillé

Foreign portfolio investors have net bought shares worth ₹60,698 crore in the first 11 days of November, the highest monthly inflow so far since December 2023, NSDL data.

Mumbai: A surge in foreign inflows has helped the rupee recover, boosting returns on Indian equities in dollar terms relative those in rupee terms and reversing a prolonged period of underperformance for overseas investors. The Nifty 50 rose 11% in dollar terms between 30 October and 11 November, compared with a 9.5% gain in rupee terms. Dollar returns matter particularly to foreign investors, who had turned cautious on India amid subdued market performance, with the rupee’s depreciation further eroding their returns when converted into dollars.

In the year through 30 October, the Nifty 50 delivered negative dollar returns of 16.77%, significantly worse than its 10.92% decline in rupee terms. That trend has reversed since 30 October, with dollar returns now outpacing rupee returns.

Foreign portfolio investors (FPIs) have net bought shares worth ₹60,698 crore in the first 11 days of November, the highest monthly inflow so far since December 2023, NSDL data. FPIs stepped up their purchases in Indian markets from 30 October and market participants expect FPI purchases to gather further momentum in the coming weeks.

A cooling AI trade in the US and easing oil prices, following Republican losses in the midterm elections, have also improved the appeal of Indian equities. The rupee has appreciated 1.5% since 30 October to ₹93.69 against the dollar as of 11 November, recovering after touching record lows earlier this year.

The current inflows into India could be driven by investors covering their India ‘anti-AI’ short positions, as global and emerging-market funds rebalance their underweight allocations to the country, said Arvind Chari, chief investment strategist at Q India UK, an affiliate of Quantum Advisors India that helps foreign investors allocate money to India.

The clinching factor for the rupee is the recent FPI inflow. If crude trends below $100 per barrel, the rupee could appreciate to as much as 93 to the dollar by the year-end,” said Madan Sabnavis, chief…

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