Foreign investors have infused ₹27,856 crore into domestic equities in the first half of this month, driven by the Indian market's resilience and optimism around a potential US interest rate cut.
Foreign Portfolio Investors (FPIs) have been consistently buying equities since June, after pulling out ₹34,252 crore in April and May.
The upcoming US Federal Reserve's decision on interest rates during next week's FOMC meeting is expected to influence future FPI investments in Indian equities, said Himanshu Srivastava, Associate Director of Manager Research at Morningstar India.
Data from depositories shows FPIs made a net investment of ₹27,856 crore in equities till September 13, bringing their total equity investment this year to ₹70,737 crore.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributes the strong FPI buying to two factors: the consensus that the US Fed may begin cutting rates this month, lowering US yields, and the Indian market's resilience and strong momentum, which FPIs are eager not to miss.
Cooling US inflation, which dropped to a 43-month low of 2.5% in August, has reinforced expectations of a rate cut, which could boost fund flows from the US to emerging markets. However, high valuations in India remain a concern.
Manoj Purohit, Partner and Leader at FS Tax, BDO India, said robust inflows reflect global confidence in India’s economic outlook and political stability, as well as the government's long-term growth initiatives. Regulatory reforms that streamline the FPI investment process have also boosted investor sentiment.
In addition to equities, FPIs invested ₹7,525 crore in debt through the voluntary retention route in the first two weeks of September, and ₹14,805 crore in government debt under the Fully Accessible Route (FAR).
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