FPI infuse Rs 30,772 crore into Indian markets ahead of Union Budget 2024

In July so far, Foreign Portfolio Investors (FPIs) have injected Rs 30,772 crore into Indian equities, buoyed by expectations of ongoing policy reforms, sustained economic growth, and robust corporate earnings. The anticipation of a reform-oriented budget has further bolstered investor sentiment, according to Himanshu Srivastava, Associate Director - Manager Research at Morningstar Investment Research India.

Looking ahead, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that if the current trends of a weakening dollar and bond yields persist, FPIs are likely to maintain their buying activity in the market. Both domestic and foreign investors are closely monitoring potential adjustments to the long-term capital gains tax in the upcoming Budget scheduled for July 23.

Data from depositories shows FPIs have registered a net inflow of Rs 30,772 crore into equities this month as of July 19. This follows a significant inflow of Rs 26,565 crore in June, driven by political stability and a sharp market recovery. In contrast, May saw FPI outflows amounting to Rs 25,586 crore due to election uncertainties, and April witnessed concerns over changes in India's tax treaty with Mauritius and rising US bond yields, leading to FPI withdrawals exceeding Rs 8,700 crore.

"The reformation of the NDA government for a third consecutive term has positively influenced investor sentiment, fostering expectations of sustained economic growth and continued policy reforms," noted Srivastava. He also attributed investor confidence to the better-than-expected performance in the ongoing earnings season.

Aside from equities, FPIs have also invested Rs 13,573 crore in the debt market during the same period, bringing the total debt inflows to Rs 82,197 crore for the year thus far.

During the fortnight ending July 15, FPIs focused their equity purchases on sectors like autos, capital goods, healthcare, IT, telecom, and oil and gas. Notably, there was a lack of buying interest in financial services, which has contributed to the sector's subdued performance in July, according to Vijayakumar.

In July 2024, emerging markets experienced varied FPI flows. Alongside India, Brazil, Indonesia, Malaysia, the Philippines, and South Korea saw inflows, whereas Taiwan, Thailand, and Vietnam witnessed outflows.

(With input from agencies.)

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