India is back in the FPI shopping list. For the second straight month, Foreign Portfolio Investors (FPIs) invested Rs 32,365 crore into Indian equities in July, driven by expectations of continued policy reforms, sustained economic growth and a stronger-than-expected earnings season.
However, FPIs pulled Rs 1,027 crore from equities during the first two trading sessions of August, according to data from the depositories. The flow of FPI investments has shown mixed trends following the budget announcement, which included an increase in capital gains tax on equity investments.
Looking ahead, developments in the US economy and markets are expected to influence FPI trends for the rest of August, said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“Weaker-than-expected employment data along with slowing economy has made it certain that the US Fed is expected to cut rates in September. The more important question here is the extent of cut. Currently, there is strong commentary getting built for maybe a 50 basis points rate cut in interest rates,” Vaibhav Porwal, Co-founder of Dezerv, said.
In July, FPIs’ net inflow of Rs 32,365 crore followed an inflow of Rs 26,565 crore in June, which was driven by political stability and a market rebound. Prior to this, FPIs had withdrawn Rs 25,586 crore in May due to election-related uncertainties and over Rs 8,700 crore in April amid concerns about changes to India’s tax treaty with Mauritius and rising US bond yields.
The recent uptick in FPI investments is attributed to continued economic growth, government infrastructure initiatives, and better-than-expected earnings that have strengthened corporate balance sheets. Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment Research India, also highlighted that upward revisions in India’s GDP forecast by the IMF and ADB, along with a slowdown in China, are positive factors for India.
In addition to equities, FPIs invested Rs 22,363 crore in the debt market in July, bringing the total debt market investment for the year to Rs 94,628 crore.
