The foreign investors invested close to Rs 11,000 crore in domestic entities during the first week of the month due to the resilience of the Indian market and the anticipation of a rate cut in the US. Since June, foreign portfolio investors (FPIs) have been steadily buying equities. They had already taken out funds totalling Rs 34,252 crore in April and May.

Himanshu Srivastava, Associate Director- Manager Research, Morningstar Investment Research India, said that the recent inflows show promise and may continue due to India’s stable macroeconomic position. Global factors such as the US interest rate and the geopolitical environment, would still be important. “The substantial net inflows this week can be attributed to enhanced speculation of the commencement of interest rate cut cycle soon, coupled with improved prospects for India’s economic growth,” Srivastava said.

Based on information provided by the depositories, foreign portfolio investors invested a total of Rs 10,978 crore into equities this month up until September 6. FPIs have been on a buying spree in the Indian equities markets since US Federal Reserve Chair Jerome Powell’s remarks, which hinted at the possibility of a rate cut.

Srivastava added that purchasing a small number of few selected large-cap stocks also contributed to the inflows, indicating the desire of foreign investors to take advantage of the opportunities offered by the Indian equities markets.

Additionally, a number of regulatory reforms intended to simplify the FII investments have uplifted investor sentiment.

According to V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the consequent fall in the US 10-year bond yield to 3.73 per cent 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, he added.

During the period under review, FPIs made around Rs 7,600 crore in debt market in addition to equity. Sunil Damania, Chief Investment Officer at MojoPMS, said that the investors should reassess their allocations with caution, taking into account China’s persistent economic difficulties and worries about a possible US recession. He went on to say that emerging markets might see a slowdown in FPI inflows if the risk-off approach keeps gaining ground.

(with PTI inputs)