Top foreign investors outpace Indian benchmark indices in June quarter
Active stock selection allowed the majority of leading foreign portfolio managers in India to beat headline indices during a period of global shipping and oil volatility.
At least 75 percent of the top 20 foreign portfolio investors saw their disclosed Indian portfolio values increase between 10 percent and 37 percent in the June quarter. This performance outpaced the headline indices during the period, according to a study by Prime Database using end-of-quarter valuations.
The benchmark Sensex index gained nearly 6.3 percent during the quarter, while the Nifty advanced 6.8 percent. The strong relative returns for foreign investors underscore India’s growing reputation as a stock picker’s market, where active management can generate returns that diverge sharply from broad market gauges.
While the headline benchmarks posted single-digit gains, the broader market moved significantly higher. The BSE Mid-cap 150 index climbed 17 percent, and the BSE SmallCap 250 index rose 24.5 percent.
Analysts note that the boost in foreign portfolio values stems from a combination of underlying stock gains and fresh capital inflows. However, identifying specific winning stocks likely contributed a substantial portion of the overall increase in disclosed portfolio values.
Despite the active management outperformance in local terms, Indian equities yielded relatively circumspect gains when compared to the substantial returns seen in other Asian markets. In dollar terms, China gained 22.2 percent, Taiwan jumped 46.3 percent, and South Korea fetched 64.24 percent during the same period.
The broader MSCI Emerging Markets Index, which includes these nations, advanced 23 percent. The massive gains in Taiwan and South Korea were largely fueled by semiconductor trades tied to the artificial intelligence boom, though these specific trades have been partially unwound in the months since.
The strong stock-picking results for foreign investors in India were achieved against a backdrop of significant macroeconomic headwinds. The quarter was marked by extreme volatility in global oil prices and a simultaneous surge in international shipping rates.
The emphasis on selective stock picking is also evident in the shifting strategies of domestic institutional investors. During July, mutual funds reduced their exposure to public sector banks while simultaneously raising their bets on the information technology, automotive, and pharmaceutical sectors.
