Foreign portfolio investors (FPIs) invested more in Indian equities compared with domestic institutional investors (DIIs) in July. This is the first such instance in 2024 and comes against the backdrop of the US Fed signalling a rate cut in September. While FPIs bought stocks worth Rs 32,364.84 crore, DIIs invested Rs 23,486.02 crore.
Milind Muchhala, ED, Julius Baer India, said the activity by FPIs had been mixed with bouts of buying and selling. “Their activity will remain influenced by global markets, the dollar, geopolitical events and opportunities in the India given slightly-elevated valuation levels,” he said.
Two major domestic events – Lok Sabha elections and the Budget – and lower valuations in China triggered the bouts of selling in India in the first half of 2024, experts said.
“The government’s robust fiscal discipline could lead to a rating upgrade for India, enhancing its investment appeal,” said Vaibhav Porwal, co-founder, Dezerv, adding that valuations of large-cap stocks, where FPIs typically invest, are currently at reasonable levels.
Market participants, however, do not expect consistent fund flows from FPIs given the macroeconomic environment in the US. “The sharp drop in job creation and the rising unemployment indicate the rising possibility of a recession in the US, which, the market so far has ruled out,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
These concerns could lead to volatility in fund flows even in the second half of the current fiscal, say experts.
Vipul Bhowar, director — listed investments, Waterfield Advisors, said FPIs may opt to prioritise sectors that stand to benefit from domestic reforms and growth, such as technology and infrastructure, while approaching sectors vulnerable to global economic downturns with prudence.