NEW DELHI: Foreign investors have made a strong return to Indian equities, with a net investment of Rs 24,454 crore in the first week of December, driven by stabilizing global conditions and expectations of potential US Federal Reserve rate cuts.
This recovery follows the largest outflow ever recorded in the last two months, with foreign portfolio investors (FPIs) pulling out a net Rs 21,612 crore in November and a record Rs 94,017 crore in October.
September had seen a remarkable nine-month high in FPI inflows, with a net investment of Rs 57,724 crore, underscoring the volatility in foreign investment trends. With the recent inflow, FPI investments in 2024 have now totaled Rs 9,435 crore, according to data from the depositories.
Looking ahead, the flow of foreign investments into Indian equity markets will depend on several key factors, including the policies introduced during Donald Trump’s presidency, the current inflation and interest rate environment, and the shifting geopolitical landscape, Himanshu Srivastava, associate director and research manager at Morningstar Investment Research India, told PTI.
He noted the third-quarter earnings performance of Indian companies and the country’s economic growth progress will be pivotal in shaping investor sentiment and driving foreign inflows.
The recent market correction may have encouraged FPIs to increase their exposure, he added.
According to depository data, FPIs have made a net investment of Rs 24,454 crore in the month to date, as of December 6.
Trivesh D, COO of Tradejini, a stock trading platform, attributed this inflow to improving global conditions and the potential for US Federal Reserve rate cuts.
He further noted that uncertainty in Chinese equities, driven by proposed tariffs from US President-elect Donald Trump on China and other nations, may have encouraged FPIs to turn their attention back to Indian equities, which, despite relatively high valuations, offer clearer long-term growth prospects.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said the shift in FPI strategy is reflected in stock price movements, particularly in large-cap banking stocks, where FPIs have been selling.
He also highlighted that this sector holds more potential as it remains reasonably valued and continues to grow steadily, with increased domestic institutional and retail investments anticipated.
Moreover, the IT sector is expected to perform well, drawing heightened interest from foreign institutional investors.
During the same period, FPIs withdrew Rs 142 crore from the general debt limit while investing Rs 355 crore in the debt Voluntary Retention Route (VRR).
Overall, FPIs have invested Rs 1.07 lakh crore in the debt market so far this year.
