Foreign investors have made a robust return to the Indian equities market, injecting more than Rs 2 lakh crore during the fiscal year 2023-24.
This resurgence comes amidst a backdrop of optimism surrounding India's strong economic fundamentals, despite facing challenges from a volatile global environment.
According to data available with the depositories, Foreign Portfolio Investors (FPIs) made a net investment of approximately Rs 2.08 lakh crore in Indian equities and Rs 1.2 lakh crore in the debt market, collectively pumping Rs 3.4 lakh crore into the capital market during the fiscal year.
This bullish trend marks a stark contrast to the preceding two financial years, where Indian equities experienced net outflows from foreign investors. In 2022-23, FPIs pulled out Rs 37,632 crore amidst global central bank rate hikes.
Prior to that, a massive withdrawal of Rs 1.4 lakh crore was observed. However in 2020-2021, FPIs recorded a record investment of Rs 2.74 lakh crore.
The resurgence in FPI investments can be attributed to various factors including global economic conditions, currency movements, and the health of the domestic economy. Himanshu Srivastava, Associate Director at Morningstar Investment Research India, highlighted that investors favored Indian equities due to the country's demonstrated resilience during uncertain periods, positioning it as a stable investment destination amid global turbulence.
Bharat Dhawan, Managing Partner at Mazars in India, expressed cautious optimism for the outlook in 2025, anticipating sustained FPI inflows driven by progressive policy reforms and economic stability. However, he emphasized the importance of strategic planning and agility in navigating potential market volatility influenced by global geopolitical factors.
Nitin Raheja, Executive Director at Julius Baer India, said that "Attractive yields on Indian sovereign debt relative to US treasuries, coupled with strong macroeconomic indicators have fueled FPI interest in Indian debt instruments"
Moreover, the upcoming inclusion of Indian government bonds in JP Morgan's benchmark emerging market index is expected to further attract significant inflows into the Indian debt market.
Despite intermittent bouts of selling, particularly in September and October, FPIs ended the fiscal year on a positive note, indicating sustained interest in Indian equities. The market dynamics, including China's emergence post-lockdown and subsequent struggles to sustain investor interest, influenced FPI investment patterns throughout the year.
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