Foreign portfolio investors (FPIs) have been buying stocks steadily since June. Prior to that, they had withdrawn funds amounting to ₹34,252 crore in April-May.
The recent capital inflows are promising and could continue, supported by India’s stable macroeconomic position. However, global factors such as the US interest rate and geopolitical scenario will continue to be the driving force, said Himanshu Srivastava, associate director and research manager, Morningstar Investment Research India.
According to the data from the depositories, the FPIs made a net investment of ₹10,978 crore worth of shares this month (till September 6).
FPIs have been on a buying spree in Indian equity markets after sentiments improved following comments by US Federal Reserve Chairman Jerome Powell who suggested that a rate cut could be on the horizon.
“This week’s significant net inflows can be attributed to increased speculation about the early start of the rate cutting cycle, coupled with India’s improving economic growth prospects,” Srivastava said.
Moreover, buying of a few select large-cap stocks also contributed to the inflows, indicating the eagerness of foreign investors to grab the opportunities presented by Indian equity markets, it said.
Furthermore, a series of regulatory reforms aimed at streamlining the investment process of FIIs has further improved investor confidence.
The consequent fall in the 10-year US bond yield to 3.73 per cent is positive for FPI inflows into emerging markets like India, said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
However, high valuations are a cause for concern. If US growth concerns weigh on global equity markets in the coming days, he added, blue-chip investors are likely to take the opportunity to buy into India.
Apart from equities, foreign investors poured over Rs 7,600 crore into the debt market during the reporting period. Sunil Damania, chief investment officer at MojoPMS, said concerns over a possible recession in the US and China’s ongoing economic challenges are key to investors reassessing their allocations.
He added that if the risk-averse strategy continues to gain traction, emerging markets could experience a slowdown in FDI inflows.
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