Foreign portfolio investors (FPIs) continue with their buying spree in July with a net infusion of ₹45,365 crore in Indian equity markets on stable macroeconomic fundamentals and steady earnings growth.
However, it appears that the momentum of buying has slowed down and FPIs have turned sellers during the two trading days ahead of the US Federal Reserve meeting on Wednesday.
"The US Fed signaled the possibility of more hikes going ahead and ruled out the likelihood of rate cuts any time soon.
"The potential impact of rate hikes on global liquidity would have led foreign investors to re-evaluate their investment decisions," Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said.
- Also read: FPI investments into Debt VRR decline
According to the data, FPIs have been continuously buying Indian equities since March and infused ₹45,365 crore this month. Only one trading day is left in July.
This figure includes investment through bulk deals and primary markets, apart from investment through stock exchanges.
Also, this figure marks the third straight month, when the net flows have surpassed ₹40,000 crore mark. It was ₹47,148 crore in June and ₹43,838 crore in May.
During the last three months, from May to July, FPIs invested ₹1.36 lakh crore in Indian equity markets.
Before March, overseas investors pulled out ₹34,626 crore collectively in January and February.
V K Vijayakumar, Chief of Investment Strategy at Geojit Financial Services, said that an important feature of FPI investment is that its buy/sell strategy is influenced by external factors like the dollar index, the US bond yields, and global market trends, apart from domestic fundamentals.
This is the reason why FPIs, during the last three months, have been buying the same financial stocks which they have been selling in the first three months of 2023, he added.
"The Indian economy continues to be stable, which is positive. This would ensure that India continues to be on FPIs radar as a preferred investment destination," Morningstar India's Srivastava said.
Apart from equities, overseas investors injected ₹3,340 crore into the Indian debt market during the period under review.
With this, inflow in the equity market reached ₹1.22 lakh crore, and while the same for debt was at over ₹20,000 crore so far this year, data with the depositories showed.
In terms of sectors, financials, automobiles, capital goods, real estate, and FMCG continue to attract the bulk of FPI investment.