Foreign investors invest Rs 26,565 crore in Indian markets due to political stability and market recovery

After two months of net outflows, Indian equities saw an infusion of Rs 26,565 crore from foreign investors. The change was influenced by a stable political environment and a strong recovery in the market. Vipul Bhowar, who is the Director of Listed Investments at Waterfield Advisors, pointed out that the focus will soon move towards the budget and Q1 FY25 earnings, potentially impacting the sustainability of FPI flows.

As per data from depositories, foreign portfolio investors (FPIs) injected a net amount of Rs 26,565 crore into equities in the current month. In April, there was a net outflow of over Rs 8,700 crore due to concerns about changes in India's tax treaty with Mauritius and rising US bond yields, followed by May's net outflow of Rs 25,586 crore because of election-related worries.

Before the outflows, Foreign Portfolio Investors (FPIs) had invested a net amount of Rs 35,098 crore in March and Rs 1,539 crore in February but pulled out Rs 25,743 crore in January. Depository data shows that the current net outflow for the month is Rs 3,200 crore.

FPIs are still viewing Indian equities as overvalued, leading to a concentrated buying of select stocks instead of widespread across the market or sectors. FPIs have demonstrated a liking for financial, auto, capital goods, real estate, and specific consumer sectors.

Moreover, FPIs injected Rs 14,955 crore into the debt market in June, taking their overall debt market investment to Rs 68,624 crore in 2024 until now. The addition of India to the JP Morgan Bond Index is viewed as a positive advancement that will eventually lower government borrowing expenses and corporate capital costs, benefiting the economy as well as the equity and debt markets.