Market gets a shot-in-arm: FPIs invest ₹7,900cr in Indian stocks
Foreign investors have pumped over ₹7,900 crore into Indian equities during the first week of July, riding on a strong economic and earnings growth momentum. This has escalated the total foreign investment in equities to ₹1.16 lakh crore so far this year, as per depository data. Experts indicate that the Union Budget and Q1 FY25 earnings could be pivotal in determining the sustainability of these FPI flows.
Strong interest in Indian market post-election
In the first week of July, Foreign Portfolio Investors (FPIs) made a net inflow of ₹7,962 crore into equities. This comes after an inflow of ₹26,565 crore in June, spurred by political stability and a sharp market rebound. However, before this surge, FPIs had withdrawn ₹25,586 crore in May due to election uncertainties and over ₹8,700 crore in April, amid concerns over changes in India's tax treaty with Mauritius and a sustained rise in US bond yields.
Investment choices influenced by external factors
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that FPI flows are significantly swayed by external factors such as rising bond yields in the US and low valuations in other emerging markets. He explained that when these conditions alter, FPIs tend to become buyers again in India. In the fortnight ending June 30, FPIs heavily invested in telecom and financial services sectors, while showing interest in capital goods, autos, healthcare, and IT.
FPIs also invest heavily in Indian debt market
Apart from equities, FPIs also invested ₹6,304 crore in the debt market during the period under review. This has pushed the debt tally to ₹74,928 crore for the year so far. Vijayakumar said this divergence in equity and debt inflows is because of the inclusion of Indian government bonds in the JP Morgan EM Govt Bond Index and front-running by investors.
