Amidst rate cut expectations at the upcoming US Federal Reserve meeting on September 18, Foreign Portfolio Investors (FPIs) continue to double down on Indian equities pumping in ₹27,856 crore up till September 13.
With these latest monthly inflows up till September 13, total FPI net investments for the calendar year have reached ₹70,737 crore, according to depository data.
In the last five trading sessions this past week, FPIs had net invested ₹16,878 crore, building on the net inflows of ₹10,978 crore in equities in September’s first week.
Dalal Street had this past week reversed its previous week’s losses with Nifty and Sensex surging 2 per cent each.
The increased FPI inflows in September come on top of the strong buying interest seen in the last week of August 2024 when FPIs had net invested ₹23,586 crore, reversing a trend of majorly remaining net sellers for most of last month.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that a significant trend in the market for the week ended September 13 is that FPIs were buyers of equity in the cash market on all days of the week. This makes FPIs buyers for equities worth ₹27,862 crore for September through 13th, he said.
“It is significant to note that unlike in previous weeks when FPIs were buyers through the primary market, this week, they were buyers through the exchanges having bought equity for ₹22,707 crore”, he said.
There are two reasons why FPIs have changed their strategy from selling to buying. One, there is a consensus now that the US Fed will start cutting rates from this month onwards pushing the US yields down. This will facilitate fund flows from the US to emerging markets, Vijayakumar said.
Two, the Indian market is extremely resilient with strong momentum and missing out on the Indian market would be a bad strategy for FPIs. High valuations in India, however, continues to be a concern, he added.
Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India, said that the month of September came with a full swing from the FPI fraternity which made a substantial infusion in the Indian equity market, recording the second-highest single-day purchase of 2024.
This shift in the investment wave is largely attributable to the Indian equity market reaching new all-time highs, Purohit said.
The robust inflows are due to underlying factors such as global confidence in India’s economic outlook and the government’s commitment to drive a long-term growth story, Purohit added.
FPIs are encashing at the right time to tap the Indian market amidst positive market sentiments and political stability, contributing to the rally. “This incursion not only mirrors the growing attractiveness of Indian equities but also emphasizes the confidence foreign participants have shown in India’s financial markets historically as well as during geopolitical crises and other macro factors”, Purohit added.
For the entire August 2024, FPI inflows into equities stood at ₹7,332 crore, lower than the net investment of ₹32,365 crore in July 2024 and ₹26,565 crore in June 2024.
Debt Flows Sizzle
FPIs total net investments in the debt market stood at ₹22,300 crore this month (till September 13). This is much higher than net investments of ₹17,100 crore in the debt market in August 2024. Except in April 2024, all the other months so far this fiscal saw net inflows into Indian debt market.
Global funds have poured close to $18 billion into the Indian government’s debt since the September 2023 index inclusion announcement of JP Morgan Chase & Co.
JP Morgan had then announced that it would add, from June 28, 2024, the Indian government bonds to its global emerging markets index for government bonds, opening up a $1.3 trillion Indian sovereign debt market to a broader range of global investors.
The inclusion of Indian government bonds will be staggered over a 10-month period from June 28 to March 31, 2025, it was then announced.