FPIs infuse Rs 40,710 crore in equities on strong economic outlook

Fresh FPI inflows: Foreign Portfolio Investors (FPIs) have shown a strong return to the Indian equity markets, with an investment of Rs 40,710 crore in the first half of the month. This follows a modest investment of Rs 1,539 crore in February and an outflow of Rs 25,743 crore in January, as per data from the depositories.

The recent surge in FPI activity can be attributed to several factors. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted FPIs' response to changes in US bond yields, which could lead to potential selling in the future. However, Himanshu Srivastava, Associate Director Manager Research at Morningstar Investment Research India, underlined the positive global and domestic economic outlooks prompting FPIs to invest in growth-oriented markets like India, especially after a market correction.

Shantanu Bhargava, Managing Director and Head of Discretionary Investment Services at Waterfield Advisors, cited strong GDP growth expectations, anticipation of policy shifts by the RBI including rate cuts, and political stability as additional factors driving FPI inflows.

In addition to equities, FPIs have infused a substantial Rs 10,383 crore into the debt market this month. This influx coincides with Bloomberg's announcement of India's bonds inclusion in its Emerging Market (EM) Local Currency Government Index, effective January 31 next year. Moreover, FPIs' sustained interest in the debt market is propelled by the forthcoming inclusion of Indian government bonds in the JP Morgan Index.

JP Morgan Chase & Co.'s decision to add Indian government bonds to its benchmark emerging market index from June 2024 is anticipated to attract significant foreign investment, estimated between $20-40 billion over the next 18 to 24 months. This inflow is expected to enhance the accessibility of Indian bonds to foreign investors and potentially strengthen the Indian Rupee, thereby contributing to overall economic growth.

As of now, total FPI inflows for the year stand at over Rs 16,505 crore in equities and Rs 52,639 crore in the debt market, reflecting continued investor confidence in India's investment landscape.

(With PTI inputs)