During the first week of July, Foreign portfolio investors (FPIs) have injected more than Rs 7,900 crore into the Indian stock market, which takes the total foreign investment to Rs 1.16 lakh crore so far for this year, according to data with the depositories. The Union Budget and Q1 FY25 earnings will guide the momentum of FPI flows shortly, says analysts.
Recently Indian equities saw a net inflow of Rs 7,962 crore from FPIs, adding to the Rs 26,565 crore inflow last month. The unexpected hike comes amid optimism in the market after the Lok Sabha elections were declared on the expectations of a stable government at the Centre and policy continuation under the new regime. In May, during the elections, there was uncertainty over who would form the new government causing panic, forcing FPIs to withdraw Rs 25,586 crore.More than Rs 8,700 crore was withdrawn in April regarding over changes in India’s tax treaty with Mauritius and a spike in returns on US bonds.
Milind Muchhala, the Executive Director, of Julius Baer India, believes that some of the foreign investors were waiting for the election results to be declared to infuse their money back into Indian equities. He also added that India remains an attractive investment destination amid a healthy economic and earnings growth momentum, and the FPIs cannot afford to ignore the markets for too long.
Geojit Financial Services Chief Investment Strategist V.K. Vijayakumar told the outlet that FPIs that withdrew money will return to India as their selling was due to external factors like rising US bond yields and lower valuations in other markets. FPIs have also invested Rs 6,304 crore in the debt market, during the same period taking the total to Rs 74,928 crore as of July 5. According to Vijayakumar, the JP Morgan EM Govt Bond Index’s move to include Indian government bonds and the front running by investors helped to increase the inflows in debt.
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