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Foreign Portfolio Investors (FPIs) have shown optimism in Indian equities with net investments of ₹12,170 crore until June 21, reversing a two-month selling trend. Reflecting confidence in the Modi 3.0 government’s policy continuity, FPIs have increased their buying interest in Indian equities despite high valuation concerns. The trend indicates a positive outlook for the Indian equity market.
The FPI net inflows in June contrast the net outflows in April and May 2024, with FPIs selling at high valuations and buying where valuations are reasonable. The FPI activity in June saw investments in financial services, telecom, and realty, while selling occurred in FMCG, IT, metals, and oil and gas sectors.
Market experts have highlighted three primary reasons for the positive inflow of FPIs. First, the continuity of the government assures ongoing reforms. Second, the Chinese economy’s deceleration has led to a shift in investments. Third, certain block deals in the market have attracted FPI interest.
The long-term outlook for FPI flows into Indian debt remains positive, as India’s inclusion in global bond indices has triggered foreign fund inflows. Despite short-term macroeconomic uncertainty, analysts believe the trend will reverse once the interest rate outlook becomes clearer, contributing to a sustained interest in Indian markets.
In 2024, FPIs have been pulling out of India, except for a significant inflow in March. However, the recent resurgence in FPI investments, post the general election results, signals a renewed interest in Indian equities driven by expectations of policy continuity and economic growth. The sentiment is further bolstered by the anticipation of a pro-growth budget, adding to investor confidence in the market.
Foreign investors have also shown consistent interest in Indian debt markets in 2024, despite minor fluctuations in flows. India’s inclusion in global indices has been a contributing factor to positive debt inflows. Overall, India remains an attractive long-term investment destination for global investors, with the recent uptick in FPI investments reflecting a positive outlook for the Indian market.
