Foreign investors inject Rs 15,352 crore into equities in first half of July

FII investment: Foreign Portfolio Investors (FPIs) have infused Rs 15,352 crore into Indian equities during the first two weeks of July, driven by the government's commitment to ongoing reforms, low US Federal Reserve rates, and strong domestic demand.

The upcoming Union Budget is highly anticipated by foreign investors, as they seek to understand the government's plans for economic growth, noted Himanshu Srivastava, Associate Director - Manager Research at Morningstar Investment Research India.

According to data from the depositories, FPIs have made a net inflow of Rs 15,352 crore in equities this month (till July 12). This follows an inflow of Rs 26,565 crore in June, spurred by political stability and a strong market rebound.

Prior to this, FPIs withdrew Rs 25,586 crore in May due to election-related uncertainties and over Rs 8,700 crore in April, amid concerns over changes in India's tax treaty with Mauritius and a sustained rise in US bond yields.

Manoj Purohit, Partner and leader - FS Tax, Tax and Regulatory Services at BDO India, attributed the latest FPI flows to positive sentiment, the government's assurance of continued reforms, low US Fed rates, and strong domestic demand. The anticipation of a reform-oriented budget and a better-than-expected earnings season have also bolstered investor confidence, added Srivastava.

In addition to equities, FPIs invested Rs 8,484 crore in the debt market during the review period, pushing the debt tally to Rs 77,109 crore so far this year.

While domestic institutional investors (DIIs), including mutual funds, have shown consistent monthly buying in 2024, FPI flows have been more volatile. FPIs sold a cumulative Rs 60,000 crore in January, April, and May, but bought Rs 63,200 crore in February, March, and June combined.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explained that FPI activity is influenced by external factors like US bond yields and valuations in other markets, whereas DII activity is primarily driven by domestic market flows.

Abhishek Banerjee, Smallcase Manager and founder at Lotusdew, noted that FPIs have a significant opportunity in India, where they can earn high returns in foreign currency, benefit from rising stock prices, and gain from falling bond yields. However, he highlighted the challenge for investors in choosing between the momentum in Indian markets and the value in the cheaper Chinese markets.

In sectoral terms, Vijayakumar pointed out that better-than-expected results from IT majors so far suggest potential for FPIs to invest in these stocks, where valuations are not excessively high.

(With PTI inputs)