Foreign investors have bought nearly $6 billion of Indian equities in November, with more than $1.7 billion in a single day last week. Between mid-October and 10 November, net foreign portfolio inflows were about $8 billion, according to PrimeInvestor. The Nifty 50 has climbed 11.6 percent since October, one of the world’s best-performing major markets this quarter, and gained 13 percent in a month, a rise that has put India among the strongest markets in the world this quarter. For overseas holders, the gains have shown up as dollar returns that ran ahead of the rupee rise, because the currency strengthened at the same time as share prices climbed.
The rupee strengthened to 93.69 against the dollar on 11 November, its strongest since April, a gain of about 3 percent against the dollar in the same period. The rise in the currency added to the gains in share prices, so dollar returns on Indian shares ran ahead of the rupee gains. The two moves together gave foreign holders a better result in dollar terms than the local market rise alone would suggest. The rupee had traded near record lows in early October, and the turn since then has been sharp, with the currency gaining nearly 3.25 percent from its low near 96.80.
Dollar returns run ahead of rupee gains
On 11 November the Nifty gained 0.84 percent to close at 25,255.05 and the Sensex advanced 0.95 percent to 81,879.40, according to Reuters. In the first nine days of November, overseas investors added a net Rs 53,739 crore to Indian shares, reversing withdrawals of Rs 34,843 crore in October and Rs 35,861 crore in September. The turn in the flow has been fast, and the November total has already passed the sales of the two months before it. Dollar returns on those holdings rose with the index and with the currency, giving overseas buyers a gain on both counts in the same month. Dollar returns for overseas holders have been lifted by both the index and the currency in the same month.
Dollar returns and the search for alternatives
The Financial Times noted investors seeking alternatives to technology-heavy markets are looking at India, which has limited direct exposure to the global AI semiconductor trade. The point matters because much of the year’s global rally has sat in chip and AI stocks, and India offers a different mix, with banks, energy and consumer firms carrying more weight. That mix has helped dollar returns in India stand apart from the chip-led rally elsewhere. Brent crude traded near $92.41 a barrel, a level that eases the cost of oil imports and helps the rupee, and the fall in crude has been one of the reasons traders give for the return of foreign money to Indian shares.
Anuj Choudhary of Mirae Asset Sharekhan expects the rupee to hold a mildly positive bias, with spot dollar-rupee between 93.40 and 93.95. Amit Pabari of CR Forex Advisors said if inflows and softer crude persist, the pair could move towards 93.50, with 93.00 next. The two views point to a rupee that holds its recent gains, and to a currency that could strengthen further if the buying lasts. Dollar returns would rise again if the rupee moved towards 93.50, the level Pabari named, and the range the two analysts give is narrow, leaving room for the rupee to move either way in the weeks ahead.
The November buying of nearly $6 billion has already made the month one of the strongest for foreign flows this year. The inflows of about $8 billion between mid-October and 10 November show the turn began before November, and the pace has held since, with more than $1.7 billion arriving in a single day last week. Dollar returns have run ahead of the local gains through the month, helped by a rupee that rose about 3 percent and a Nifty that gained 13 percent in a month. In the first nine days of November, overseas investors added a net Rs 53,739 crore to Indian shares.