Indian stock markets have continued to attract significant interest from foreign portfolio investors (FPIs) in FY25, supported by improving macroeconomic conditions, declining inflation, and a notable interest rate cut by the US Federal Reserve. FPIs invested US$ 10.68 billion (Rs. 89,717 crore) in Indian equities during the first half of FY25, following a record inflow of US$ 23.81 billion (Rs. 2 lakh crore) in FY24. September 2024 witnessed strong inflows of US$ 6.87 billion (Rs. 57,724 crore), marking the highest monthly investment since December 2023, when FPIs invested US$ 7.87 billion (Rs. 66,135 crore). This surge can be primarily attributed to the Fed’s aggressive interest rate cut, which enhanced the attractiveness of Indian assets. However, ongoing geopolitical tensions may impact FPI sentiment. In 2024, FPIs demonstrated fluctuations in their buying patterns. They were net sellers in 4 of the 9 months year-to-date, with total inflows of US$ 11.21 billion (Rs. 94,183 crore).
In addition to equities, FPIs have shown increasing interest in the Indian debt market, becoming net buyers for the second consecutive year with inflows of US$ 13.10 billion (Rs. 1.1 lakh crore) in 2024, surpassing US$ 8.18 billion (Rs. 68,663 crore) invested in 2023. In the first half of FY24, FPIs purchased Indian debt worth US$ 6.48 billion (Rs. 54,389 crore), with September marking the fifth consecutive month of positive inflows in the debt market, totalling US$ 154.7 million (Rs. 1,299 crore). FPI inflows into Indian equities and debt amount to Rs. 30.12 billion (2.53 lakh crore) year-to-date. Experts express cautious optimism regarding future FPI inflows. Senior Vice President of Research at Angel One, Mr. Aamar Deo Singh, projects inflows could exceed US$ 11.91 billion (Rs. 1 lakh crore) for the year. While global macroeconomic factors and market valuations may pose headwinds, India’s rising prominence in global indices and favourable economic conditions could sustain FPI interest shortly. However, investors should remain vigilant regarding risks associated with shifting global dynamics and geopolitical uncertainties.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
