FPIs return to Indian equities; infuse Rs 22,766 cr

Foreign investors have made a strong comeback to Indian equities with a net investment of Rs 22,766 crore in the first two weeks of December driven by expectations of rate cut by the US Federal Reserve.

This revival follows significant outflows in the preceding months, with Foreign Portfolio Investors (FPIs) pulling out a net Rs 21,612 crore in November and a massive Rs 94,017 crore in October -- the worst monthly outflow on record.

Interestingly, September had marked a nine-month high for FPI inflows, with a net investment of Rs 57,724 crore, highlighting the volatility in foreign investment trends.

With the latest inflow, FPI investment has reached at Rs 7,747 crore in 2024 so far, data with the depositories showed.

Looking ahead, the flow of foreign investments into Indian equity markets will hinge on several key factors.

These include the policies implemented under Donald Trump's presidency, the prevailing inflation and interest rate environment, and the evolving geopolitical landscape, Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said.

Additionally, the third-quarter earnings performance of Indian companies and the country's progress on the economic growth front will play a crucial role in shaping investor sentiment and influencing foreign inflows, he added.

According to the data with the depositories, FPIs have made a net investment of Rs 22,766 crore in this month (till December 13).

This was driven by expectations of a US Federal Reserve rate cut.

A shift toward monetary easing has improved global liquidity, drawing capital into emerging markets like India.

These inflows reflect sustained interest in India as a growth market, Karthick Jonagadla, smallcase manager and founder of Quantace Research, said.

Also, the Reserve Bank of India (RBI) enhanced liquidity by lowering the Cash Reserve Ratio (CRR) that boosted investors' sentiment, Vipul Bhowar, senior director - Listed Investments at Waterfield Advisors, said.

Additionally, India's Consumer Price Index (CPI) inflation dropped to 5.48 per cent in November from 6.21 per cent in October, enhancing investor confidence and raising hopes for potential monetary policy easing by the RBI, he added.

Even though FPIs have turned buyers in December, they have been large sellers too on certain days.

This indicates that at higher levels, they may again turn sellers since Indian valuations continue to be relatively high compared to other markets, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

The rising dollar is another concern which might prompt FPIs to sell at higher levels, he added.

On the other hand, FPIs invested Rs 4,814 crore in the debt general limit and pulled out Rs 666 crore from the debt Voluntary Retention Route (VRR) during the period under review.

So far this year, FPIs have  invested Rs 1.1 lakh crore in the debt market.