According to depositories’ data, foreign portfolio investors (FPIs) pumped Rs 11,366 crore into the debt market this month (till August 24). Foreign investors have pumped Rs 11,366 crore into the Indian debt market so far in August, taking the net inflow tally in the debt segment to over Rs 1 lakh crore.
Experts said the strong buying interest of foreign investors in the Indian debt market can be attributed to India’s inclusion in JP Morgan’s emerging market government bond indices in June this year.
Prior to that, they withdrew Rs 10,949 crore in April. With the latest inflow, FPIs’ net investment in debt has reached Rs 1.02 trillion in 2024 so far.
Market analysts said that since India’s inclusion was announced in October 2023, FPIs have been concentrating their investments in Indian debt markets in anticipation of inclusion in global bond indices.
Even after the inclusion, his entries have remained solid.
On the other hand, FPIs withdrew over Rs 16,305 crore from equities so far this month, due to the sell-off in the yen carry trade, US recession fears and ongoing geopolitical conflicts.
Himanshu Srivastava, associate director of manager research at Morningstar Investment Research India, said the post-Budget announcement of a hike in capital gains tax on equity investments has largely fueled this sell-off.
Moreover, FPIs have been cautious due to high valuations of Indian equities, coupled with global economic concerns such as rising fears of recession in the US amid weak jobs data, uncertainty over the timing of interest rate cuts and unwinding of the yen carry trade, he added.
Overall, India remains in a favourable position, attracting long-term investments from foreign direct investment institutions.
“Amid a global slowdown and geopolitical crisis in the Middle East and neighbouring countries, India is still in a sweet spot forcing the foreign fraternity to go for a long-term investment horizon,” said Manoj Purohit, Partner and Head – Financial Services Tax, Tax & Regulatory Services, BDO India.
In terms of sectors, FPIs were the biggest sellers in India’s financial sector in the first fortnight of August.
Vipul Bhowar, head of listed investments at Waterfield Advisors, said FPIs are selling banking stocks due to concerns over slow deposit growth.
“Banks are also facing challenges in the first quarter of FY25, with narrowing margins, deteriorating asset quality and rising provisions, especially in credit cards, personal loans and agricultural portfolios,” it said.
Besides, selling was seen in many other sectors, including metals, on fears that the economic slowdown in the US and China will keep metal prices low, said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
In contrast, foreign investors bought into telecoms and healthcare, where growth and earnings prospects are secure and bright, he added.
(With PTI inputs)
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.