Foreign investors made a notable return to the Indian stock market this week -- August 19-23.
The foreign investors made a net purchase of equities amounting to ₹4,897.16 crore, according to data from the National Securities Depository Limited (NSDL). This marks a significant shift from the previous week (August 12-17), when foreign portfolio investors were net sellers, offloading equities worth ₹7,769.73 crore.
Despite this week's positive inflow, the overall net investment by foreign investors in August remains negative. So far this month, foreign investors have sold equities worth ₹16,305 crore in the Indian market.
This trend highlights the volatility in foreign investment patterns during the month. Interestingly, while foreign investors were net sellers in August, domestic investors played a crucial role in supporting the Indian stock market. According to official data from the National Stock Exchange (NSE), domestic investors have consistently bought into Indian stocks, purchasing equities worth ₹47,080.38 crore in August.
This strong domestic participation has provided stability to the market amid the fluctuating foreign investment trends. "It is essential for policymakers to continue fostering an environment that encourages domestic investment while ensuring that foreign investors remain an integral part of the market.
Balancing the interests of both domestic and foreign investors will be key to sustaining growth and stability in the Indian stock market. From 6.6 per cent in December 2012, India's share in the MSCI EM Index has gone up to 20 per cent plus in August 2024," said Ajay Bagga, Banking and Market Expert. Earlier in July, net foreign investments in the Indian stock market reached ₹32,365 crore as the foreign investors were net buyers, as per data from the National Securities Depository Limited (NSDL).
This marked a continuation of strong foreign interest following June, when Foreign Portfolio Investors (FPIs) purchased Indian stocks worth ₹26,565 crore on a cumulative basis.
FPIs, which involve investors acquiring foreign financial assets, play a significant role in influencing market dynamics by chanelling substantial funds into the Indian equity market.