According to depositories data, foreign portfolio investors (FPIs) pumped Rs 11,366 crore into the debt market this month (till August 24).
This inflow followed a net investment of Rs 22,363 crore in the Indian debt market in July, Rs 14,955 crore in June and Rs 8,760 crore in May.
Prior to that, they withdrew Rs 10,949 crore in April.
With the latest inflow, foreign investors’ 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, foreign investors have been concentrating their investments in Indian debt. markets In anticipation of their inclusion in global bond indices, capital inflows have remained robust even after the inclusion. On the other hand, FPIs have withdrawn over Rs 16,305 crore from equities so far this month, due to the unravelling of the yen carry trade, US recession fears and ongoing geopolitical conflicts.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 income tax equity Investments have 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.
“There are also challenges in the first quarter of FY25 for banks with shrinking margins, deteriorating asset quality and rising provisions, especially in credit cards, personal loans and agricultural portfolios,” he said.
There was also selling 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. Geojit Financial Servicessaying.
In contrast, foreign investors bought into telecoms and healthcare, where growth and earnings prospects are secure and bright, he added.
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