While there is likely to be continued interest from investors in September, FPIFlows would be determined by a combination of internal political stability, economic indicators, movements in global interest rates and the market. ratingssector preferences and the attractiveness of the debt market, said Vipul Bhowar, Director of Listed Investments at Waterfield Advisors.
According to depositories data, foreign portfolio investors (FPIs) made a net investment of Rs 7,320 crore in Indian equities in August.
The key reason for the low investor interest in the stock market compared to the previous two months is the high valuation in the Indian market. With Nifty trading at more than 20 times the estimated earnings for fiscal 2025, India is the most expensive market. market in the world now.
FPIs have opportunities to invest in much cheaper markets and hence their priority is markets other than India, VK Vijayakumar, Chief Investment Strategist, Geojit Financial ServicesHe said. Moreover, the unwinding of the yen carry trade on August 24 significantly impacted FPI behaviour, leading to a major sell-off in Indian equities, Bhowar said. This unwinding coincided with rising fears of a possible recession in the US and disappointing economic data, which further exacerbated the market reaction, he added. Interestingly, FPIs have been selling in the secondary market, where valuations are perceived to be high, and redirecting their investments towards the primary market, which offers relatively lower valuations.
Meanwhile, FPIs pumped Rs 17,960 crore into debt markets in August.
Experts believe that inclusion in global bond indices, attractive interest rates, stable economic growth, shift away from equities and favourable long-term outlook have been the key factors driving FPIs to invest in debt.
Debt investment is led by index Inclusion flows. It was in October last year that JP Morgan announced the inclusion in the index, said Vishad Turakhia, chief executive of Equirus Securities.
India’s inclusion in global bond indices and its attractive yields have attracted inflows, said Nimesh Chandan, CIO at Bajaj Finserv Asset Management Ltd.
Moreover, FPIs are buying in the debt market mainly because the Indian rupee (INR) has remained stable this year and this stability is expected to continue, Geojit’s Vijayakumar said.
With this FPI, investment in equity has reached Rs 42,885 crore and Rs 1.08 lakh crore in the debt market in 2024 so far.
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