Foreign investors infuse Rs 26,565 crore into Indian markets on back of political stability and market rebound

Foreign investors injected Rs 26,565 crore into Indian equities after two months of net outflows. This shift was driven by political stability and a sharp market rebound.

Vipul Bhowar, Director of Listed Investments at Waterfield Advisors, noted that upcoming attention will gradually shift towards the budget and Q1 FY25 earnings, which could influence the sustainability of FPI flows.

According to depository data, foreign portfolio investors (FPIs) made a net infusion of Rs 26,565 crore in equities this month. This follows a net outflow of Rs 25,586 crore in May due to election-related jitters and over Rs 8,700 crore in April amid concerns over changes in India's tax treaty with Mauritius and rising US bond yields. 

Prior to these outflows, FPIs had made a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, while withdrawing Rs 25,743 crore in January. The net outflow now stands at Rs 3,200 crore for the month, according to depository data.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed the FPI turnaround to political stability—despite the BJP not securing a majority on its own—and a sharp market rebound driven by steady domestic institutional investors (DIIs) and aggressive retail buying.

However, FPI buying has been concentrated on select stocks rather than being widespread across the market or sectors, as Indian equities are still considered overvalued by FPIs, according to Bhowar. FPIs have shown a preference for financial, auto, capital goods, real estate, and select consumer sectors.

Kislay Upadhyay, Smallcase Manager and Founder of Fidelfolio, anticipates a steady and substantial FPI inflow due to government stability, impressive GDP performance and forecasts, stable consumer price index, ample forex reserves, and a robust banking sector.

Additionally, FPIs invested Rs 14,955 crore in the debt market in June, bringing their total debt market investment to Rs 68,624 crore in 2024 so far. India's inclusion in the JP Morgan Bond Index is seen as a positive development that will, in the long term, reduce borrowing costs for the government and capital costs for corporates, benefiting both the economy and the equity and debt markets.

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