India will continue to attract FPI inflows this month, albeit at a slower pace than in August, given the continued rate hikes by the US Federal Reserve.
India will continue to attract FPI inflows this month, albeit at a slower pace than in August, given the continued rate hikes by the US Federal Reserve.
Foreign investors have invested a little over ₹51,200 crore in Indian equities Market In August, it became the most inflows in 20 months amid improving risk sentiment and stabilization in oil prices.
This comes after foreign portfolio investors (FPIs) netted nearly ₹5,000 crore in July, data from the depositories showed.
FPIs became the first buyers in July after nine consecutive months of massive net outflows, which started in October last year. Between October 2021 and June 2022, he pulled ₹2.46 lakh crore from the Indian equity markets.
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Manish Jelloka, Co-Head of Products and Solutions, Sanctum Wealth, said India will continue to attract FPI inflows this month, albeit at a slower pace than in August, coupled with frequent rate hikes by the US Federal Reserve as well as quantitative tightening. looking at.
Arpit Jain, Joint Managing Director, Arihant Capital Markets said inflation, dollar prices and interest rates will determine FPI inflows.
According to depository data, FPIs invested a net Rs 51,204 crore in Indian equities during August. This was the highest investment by foreign investors since December 2020, when they invested a net ₹62,016 crore in equities.
“Foreign investors started pouring money into emerging markets as interest rates came down and oil prices stabilized. Tradesmart chairman Vijay Singhania said that China’s development and financial market collapse led to stability in currency markets and fall in commodity prices.
Jain said that despite a strong dollar and rising bond yields, the main reasons for buying FPIs are the fall in the Indian equity market and fall in oil and commodity prices, especially steel and aluminium.
US inflation falls below one 40-year high in June at 8.5 percent On lower petrol prices in July. In Indiaconsumer price index based Retail inflation moderates marginally to 6.71% in July as against Recorded 7.01% in June Due to the fall in food prices
Himanshu Srivastava, Associate Director- Manager Research, Morningstar India, said the net investment in the past few weeks can be attributed to several factors.
While inflation has remained elevated, it has risen lower than expected in the recent past, thus improving sentiments. He said it raised hopes that the US Fed will be less aggressive than previously expected with its rate hikes.
As a result, it somewhat eased fears of a recession in the US, thus improving the risk appetite of investors, he said.
On the domestic front, the fall in the Indian stock markets gave investors a good buying opportunity, he said.
Jelloka of Sanctum Wealth believes that the inflation situation in India is much better than that of developed economies and is expected to fall below the upper end of the RBI’s tolerance level of 6%.
FPIs used this opportunity to select high quality companies. He said that they are now buying shares of financial, capital goods, FMCG and telecom companies.
In addition, FPIs invested a net amount of ₹3,844 crore in the debt market during the month under review.
Apart from India, the flow was positive in Indonesia, South Korea and Thailand, while it was negative for the Philippines and Taiwan during August.
The month of September has started with huge volatility in FPI inflows. On the first day of the month, FPIs bought equities totaling ₹4,262 crore, but sold ₹2,261 crore on the very next day.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “This is an uncertain trend due to uncertainty around the dollar index and US bond yields.
Dollar and bond yields are believed to have reached their peak and when inflation begins to ease, the Fed will be less aggressive than it is now. He said this would facilitate more capital inflows into emerging markets and India is the best emerging market to invest in right now.