Foreign Portfolio Investors (FPIs) have invested Rs 27,856 crore into Indian equities in the first half of September, driven by optimism over a potential interest rate cut by the US Federal Reserve and the resilience of the Indian market.
FPIs have been active buyers of Indian stocks since June, following a withdrawal of Rs 34,252 crore in April and May.
Data from depositories show that FPIs’ equity investments have reached Rs 70,737 crore for the year so far.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, has attributed two major reasons for FPIs’ strong buying.
“A significant trend in the market for the week ended 13th September is that FIIs were buyers of equity in the cash market on all days of the week. This makes FIIs buyers for Rs 27862 crores for September through 13th. It is significant to note that unlike in previous weeks when FIIs were buyers through the primary market, this week they were buyers through the exchanges having bought equity for Rs 22707 crores,” he said.
“There are two reasons why FIIs have changed their strategy from selling to buying. One, there is a consensus now that the 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. Two, the Indian market is extremely resilient with strong momentum and missing out on the Indian market would be a bad strategy for FIIs. High valuations in India, however, continue to be a concern,” he added.
In addition to equities, FPIs have also invested Rs 7,525 crore in debt through the Voluntary Retention Route and Rs 14,805 crore in government debt securities under the Fully Accessible Route (FAR) in the first two weeks of September.
Manoj Purohit, Partner and leader of FS Tax at BDO India, noted that the inflows reflect global confidence in India’s economic outlook and government reforms, though high valuations in India remain a concern.