Foreign Portfolio Investors (FPIs) kicked off September 2024 with a strong start, injecting ₹10,978 crore into equities during the first week, according to depository data.
This came on top of the strong buying interest seen in last week of August 2024 when FPIs had net invested ₹ 23,586 crore, reversing a trend of majorly remaining net sellers throughout most part of last month.
The September first week reading is higher than the net equity investment of ₹ 7,322 crore in entire August 2024. In July 2024, the FPI inflows stood at ₹ 32,365 crore and in June 2024 it was ₹ 26,565 crore.
Taking into count the inflows of September first week, the total FPI net investments so far this calendar year stood at ₹ 53,859 crore.
The U.S.Federal Reserve is widely expected to cut interest rates at its September 18 meeting despite a string of weak job reports in the U.S. that have rattled investors and weighed on stock markets.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said
“Early September witnessed buying by FPIs mainly due to the resilience of the Indian market. For September through 6th FPIs invested ₹ 9642 crores in equity through the exchanges and ₹ 1388 crores through the ‘primary market and others’ category”.
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 basis points, he said.
The consequent fall in the US 10-year bond yield to 3.73 percent is positive for FPI inflows into emerging markets like India. “However, the elevated valuations are a concern. If the US growth concerns impact global equity markets in the coming days, FPIs are likely to use the opportunity to buy in India”, Vijayakumar said.
Sunil Damania, Chief Investment Officer, MojoPMS, said “Global market sentiment has notably shifted towards caution, as evidenced by Nvidia’s 25 percent decline after reaching a record high in June. Concerns over a potential U.S. 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”.
Flows from FPIs are influenced by a complex interplay of factors beyond bond inclusion. Key drivers include geopolitical dynamics, the health of the U.S. economy, Yen borrowings, and prevailing risk-off strategies, he noted.
Historically equity markets have benefitted from rate cut cycles in the US market. It is anticipated that FPIs will shift their focus to emerging markets, deploying capital where valuations are more appealing. India however is unlikely to be a significant beneficiary of these flows, economy watchers said.
On the debt markets front, FPIs have invested about ₹ 7,500 crore in the first week of September 2024, depositories data showed. In entire August this year, FPIs had made net investments of about ₹ 17,100 crore in debt market. In July 2024, FPIs have made net investment of ₹ about ₹ 16,000 crore in debt market.