Staging a strong comeback after general election results, foreign investors pumped Rs 12,170 crore in Indian equities so far in June, mainly driven by expectations of continued policy reforms and sustained economic growth. This came following a net withdrawal of Rs 25,586 crore from equities in May on poll jitters and more than Rs 8,700 crore in April amid concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields.
With the latest investment, the total outflow now stood at Rs 11,194 crore so far in 2024 (till June 21), data with the depositories showed.
Going ahead, Sunil Damania, Chief Investment Officer at MojoPMS, said foreign portfolio investors (FPIs) inflow will remain constrained due to the high valuations currently commanded by the Indian equity market.
FPIs had been waiting on the sidelines for the election results. So far in 2024, barring March (Rs 35,000 crore inflow), they have been pulling out from India.
“Though the general election results were sort of a surprise and resulted in a weaker than expected mandate, markets celebrated that yet again a stable government is formed and government continuity is maintained,” Kislay Upadhyay, smallcase Manager and founder of FidelFolio, said.
Further, business sentiment remained buoyant, and policy continuity added confidence to markets.
Damania attributed three primary reasons for this positive inflow.
“First, the continuity of the government assures ongoing reforms. Second, the Chinese economy is decelerating, as evidenced by a 12 per cent decline in copper prices over the past month. Third, certain block deals in the market have been eagerly taken up by FPIs,” Damania said.
However, these FPI inflows are concentrated in a select few stocks rather than being widespread across the market or sectors.
Additionally, the anticipation of a pro-growth budget has also lifted investor sentiment, Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said.
Early trends in FPI activity in June indicate buying in financial services, telecom and realty and selling in FMCG, IT, metals and oil and gas, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
Additionally, FPIs invested Rs 10,575 crore in the debt market during the period under review, data with the depositories showed.
Foreign investors have consistently invested in Indian debt in 2024, except for April, with a total investment of Rs 64,244 crore. India’s inclusion in the debt index positively impacts debt inflows.
“Irrespective of the short-term changes in flows, we believe India remains an attractive long-term investment destination for global investors,” Nimesh Chandan, CIO, Bajaj Finserv Asset Management Ltd, said.
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