New Delhi: Foreign investors pumped Rs 15,352 crore into Indian equities during the first half of July, buoyed by the government’s ongoing reform commitments, low US Federal rates, and robust domestic demand.
The upcoming Union Budget is eagerly anticipated by foreign investors keen to gauge the government’s strategies for economic growth, noted Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India.
Data from depositories shows that foreign portfolio investors (FPIs) recorded a net inflow of Rs 15,352 crore into equities so far this month (until July 12). This follows a robust inflow of Rs 26,565 crore in June, supported by political stability and a sharp market rebound. In contrast, FPIs withdrew Rs 25,586 crore in May amid election uncertainties and over Rs 8,700 crore in April due to concerns over changes in India’s tax treaty with Mauritius and rising US bond yields.
The recent influx of FPI investments reflects positive market sentiments, confidence in stable government reforms, subdued US Federal rates, and strong domestic economic indicators, observed Manoj Purohit, Partner and leader – FS Tax, Tax and Regulatory Services at BDO India.
Furthermore, expectations of a reform-driven budget have bolstered investor confidence, complemented by a better-than-expected earnings season, Srivastava added.
In addition to equities, Foreign Portfolio Investors (FPIs) poured Rs 8,484 crore into the debt market during the reviewed period, bringing their total debt investments to Rs 77,109 crore for the year so far.
An intriguing aspect of institutional equity flows in the Indian market is the volatile nature of FPI investments compared to the consistent buying patterns of Domestic Institutional Investors (DIIs), including mutual funds.
Throughout 2024, DIIs have remained steadfast buyers every month, whereas FPIs have alternated between buying and selling. FPIs sold a cumulative Rs 60,000 crore in January, April, and May, but countered this with purchases amounting to Rs 63,200 crore in February, March, and June combined.
“The divergence stems from FPIs reacting to external factors such as US bond yields and global market valuations, while DIIs are largely influenced by domestic market flows,” noted VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Abhishek Banerjee, Manager and Founder at Lotusdew, highlighted that FPIs find India attractive due to the potential for high returns in foreign currency, alongside gains from rising stock prices and falling bond yields. However, he acknowledged that Chinese markets offer cheaper alternatives, posing a challenge for investors torn between momentum and value.
Vijayakumar further noted that the strong performance of IT giants in recent quarters suggests potential opportunities for FPIs, especially in stocks where valuations remain reasonable.
