As the unemployment rate in the US declines while hiring slows, the Federal Reserve is expected to cut rates this month, which could boost foreign portfolio investments (FPIs) in India, market experts said on Saturday.
In early September, FPIs began increasing their investments in India, driven by the Indian market's resilience. So far, FPIs have invested ₹9,642 crore in equity through exchanges and ₹1,388 crore in the 'primary market and others' category up to September 6.
Sunil Damania, Chief Investment Officer at MojoPMS, noted that FPI flows are influenced by multiple factors beyond bond inclusion, such as geopolitical dynamics, the state of the US economy, yen borrowings, and current risk-off strategies.
“Global market sentiment has notably shifted towards caution, as evidenced by Nvidia’s 25 per cent decline after reaching a record high in June,” he mentioned.
The latest jobs data in the US indicates slowing US economy which in turn has pushed up expectations of rate cut by the Fed in September, perhaps by even 50 bp.
If the US growth concerns impact global equity markets in the coming days, FPIs are likely to use the opportunity to buy in India, said analysts.
Concerns over a potential US recession and China’s ongoing economic challenges are critical considerations for investors re-evaluating their allocations.
If the risk-off strategy continues to gain traction, emerging markets may experience a slowdown in FPI inflows, said experts.
In August, FPIs invested Rs 7,320 crore in equity compared to Rs 32,365 crore in July.
They infused more than 11,366 crore in the Indian debt market, pushing the net inflow tally in the debt segment to more than the Rs 1 lakh crore mark in 2024 to date, according to NSDL data.
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