Foreign investors pour Rs 32,365 crore into Indian equities in July

July’s FPI Surge: Foreign Portfolio Investors (FPIs) invested Rs 32,365 crore in Indian equities in July, buoyed by anticipated policy reforms and robust economic performance. This strong inflow came amid an unexpectedly positive earnings season and the prospect of continued policy support.

Post-Budget FPI trends

However, early August has seen a shift, with FPIs withdrawing Rs 1,027 crore from equities in the first two trading days of the month, according to depository data.

This change follows a mixed trend in FPI flows post-budget, which included an increase in capital gains tax on equity investments. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that future FPI trends will likely be influenced by developments in the US economy and financial markets.

Vaibhav Porwal, Co-founder of Dezerv, highlighted that weaker-than-expected employment data and a slowing US economy suggest a potential rate cut by the Federal Reserve in September. "The focus now is on the magnitude of the rate cut, with strong indications for a possible 50 basis points reduction," he said.

Market shifts overview

In June, FPIs had already shown strong inflows of Rs 26,565 crore, driven by political stability and a market rebound. This followed withdrawals of Rs 25,586 crore in May due to election uncertainties and over Rs 8,700 crore in April related to concerns over changes in India-Mauritius tax treaty and rising US bond yields.

Himanshu Srivastava, Associate Director at Morningstar Investment Research India, attributed the July resurgence to India's steady economic growth, government infrastructure initiatives, and improved corporate earnings. Additionally, revised GDP forecasts by the IMF and ADB and a slowdown in China have further supported investor sentiment.

In addition to equities, FPIs also invested Rs 22,363 crore in the debt market in July, bringing the total debt market investment for the year to Rs 94,628 crore.

(With PTI Inputs)