Foreign investors have invested Rs 57,359 crore in the Indian stock market in September. This is the biggest investment in 9 months. The main reason behind this is the reduction in interest rates by the US Federal Reserve. According to data received from depositories, foreign portfolio investment (FPI) in Indian equities has crossed Rs 1 lakh crore in 2024.
What reason did the experts give?
According to Robin Arya, founder and chief executive officer of research firm GoalFi, FPIs are expected to remain strong in the coming days, supported by cuts in global interest rates and India’s strong economic fundamentals. However, the Reserve Bank of India’s decisions on inflation management and liquidity will be important to maintain this positive trend.
According to the data, FPIs have invested Rs 57,359 crore in equities till September 27. There is still one trading session left in this month. This was the highest net inflow since December 2023, when FPIs invested Rs 66,135 crore in equities.
After June, FPIs have been buying equities continuously after withdrawing Rs 34,252 crore in April-May. Overall, FPIs have been net buyers in 2024, except in January, April and May.
Benefit from rate cuts by the US Fed
Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said that several factors have contributed to the recent increase in FPI inflows in the Indian market. These include the beginning of interest rate cuts by the US Fed, increase in India’s weightage in global indices, better growth prospects and a series of big IPOs.
The 50 basis point rate cut by the Federal Open Market Committee on September 18 has increased liquidity in the Indian market. Manoj Purohit, Partner and Leader, FS Tax, Tax and Regulatory Services at BDO India, said that the interest rate differential is expected to bring more FPI inflows to India.
Bharat Gala, Chief Operating Officer of equity broking Ventura Securities, said that many mainboard IPOs with good valuations have been listed on the stock market, hence foreign money is coming for new opportunities.
Hong Kong’s market has been the top performer in September in terms of FPI inflow data. The Hang Seng index has gained 14%. China’s monetary and financial stimulus is expected to boost the economy, which will benefit the shares of Chinese companies listed in Hong Kong.
How much was invested in debt markets?
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said if Hang Seng continues to outperform, the still undervalued market could see more fund flow.
In the debt markets, FPIs invested Rs 8,543 crore through the Voluntary Retention Route and Rs 22,023 crore through the Fully Accessible Route in September. According to Arya of GoalFi, with the fall in US bond yields, Indian government securities under FRR have become particularly attractive to foreign investors, providing higher yields and liquidity.
