Foreign investors have made a notable return to Indian equities, recording a net investment of ₹22,766 crore in the first fortnight of December. This resurgence has been driven by expectations of a rate cut by the US Federal Reserve.
The revival follows significant outflows in previous months, with Foreign Portfolio Investors (FPIs) withdrawing ₹21,612 crore in November and a record ₹94,017 crore in October — the highest monthly outflow on record. September, however, had seen a nine-month high in FPI inflows, with net investments of ₹57,724 crore, highlighting the volatility in foreign investment trends.
With this latest inflow, FPI investments for 2024 have reached ₹7,747 crore to date, according to depository data.
Looking ahead, the trajectory of foreign investments into Indian equity markets will depend on several key factors, including US monetary policies under Donald Trump's presidency, inflation trends, interest rates, and evolving geopolitical dynamics, said
Himanshu Srivastava, Associate Director, Manager Research at Morningstar Investment Research India.
He further noted that third-quarter earnings from Indian companies and progress on the economic growth front will be critical in shaping investor sentiment and influencing foreign inflows.
Data reveals FPIs have made a net investment of ₹22,766 crore in December (up to 13th December), largely driven by expectations of a US Federal Reserve rate cut. The prospect of monetary easing has bolstered global liquidity, attracting capital to emerging markets such as India, said Karthick Jonagadla, smallcase Manager and Founder of Quantace Research.
The Reserve Bank of India’s (RBI) decision to enhance liquidity by reducing the Cash Reserve Ratio (CRR) has further buoyed investor confidence, according to Vipul Bhowar, Senior Director - Listed Investments at Waterfield Advisors.
Additionally, India’s Consumer Price Index (CPI) inflation fell to 5.48% in November, down from 6.21% in October, strengthening investor confidence and raising expectations of potential monetary easing by the RBI.
Despite turning net buyers in December, FPIs have also been large sellers on certain days, signalling a potential reversal at higher valuation levels. Indian equities remain relatively expensive compared to other markets, noted V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The rising strength of the US dollar is another factor that could prompt FPIs to sell at higher levels, he added.
Meanwhile, FPIs invested ₹4,814 crore in the debt general limit and withdrew ₹666 crore from the debt Voluntary Retention Route (VRR) during the same period. Year-to-date, FPIs have invested ₹1.1 lakh crore in the debt market.
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