FPIs invest Rs 43,800 crore in Indian equities on strong macroeconomic outlook

Indian equity markets have seen a continuous surge in foreign portfolio investments (FPIs) as foreign investors poured in Rs 43,800 crore in July so far. This rise in investments is attributed to India's stable macroeconomic fundamentals, consistent earnings growth, and the economic challenges faced by China.

According to data from depositories, the total inflow into the equity market has reached Rs 1.2 lakh crore since the beginning of the year, signifying the strong confidence foreign investors have in India's economic potential.

Market analysis

Market analysts have expressed positive sentiments about the outlook for FPI inflows into Indian equities, stating that it remains bright and broad-based. The country's promising growth prospects, attractive valuations, and sound corporate earnings make it an appealing investment destination for foreign investors.

Despite the optimism, analysts have also flagged concerns over rising valuations. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that high valuations could lead to sharp corrections if negative triggers emerge in the market.

The continuous influx of funds from FPIs has propelled Indian equity markets to record highs. However, analysts caution that profit booking might occur intermittently as investors take advantage of the elevated market levels.

FPI and Indian equities

Data reveals that FPIs have been consistently buying Indian equities since March, with an infusion of Rs 43,804 crore in July alone (as of July 21). This marks the third consecutive month with net flows surpassing the Rs 40,000 crore mark. June recorded an inflow of Rs 47,148 crore, while May saw Rs 43,838 crore flowing in.

The inflow figure includes investments through bulk deals and the primary market, in addition to transactions through stock exchanges. Prior to March, overseas investors had pulled out Rs 34,626 crore collectively in January and February.

Foreign investors' interest in Indian equities has been driven by various factors. Steady earnings growth recovery, along with stable macroeconomic fundamentals, has made India an attractive investment destination compared to other economies. Moreover, concerns over the Chinese economy's recovery have prompted investors to explore opportunities in the Indian market.

In addition to equities, overseas investors have also shown interest in the Indian debt market, injecting Rs 2,623 crore during the period under review.

In terms of sectors, FPIs have continued to invest in financials, automobiles, capital goods, realty, and fast-moving consumer goods (FMCG) segments.

The strong FPI inflows have cemented India's position as the largest recipient of foreign portfolio investments among emerging markets so far this year. The country's resilience in the face of a challenging global economic landscape and its potential for sustained growth continues to attract foreign investors seeking fruitful investment opportunities.

(With PTI inputs)