Foreign Portfolio Investors (FPIs) invested a total of Rs 9,642 crores in equity through exchanges and an additional Rs 1,388 crores in the ‘primary market and others’ category in early September.
The FPIs showed strong interest in the Indian market, reflecting its resilience amid global uncertainties.
“The latest jobs data in the US indicates slowing US economy which in turn has pushed up expectations of rate cut by the Fed in September, perhaps by even 50 bp. The consequent fall in the US 10-year bond yield to 3.73% is positive for FPI inflows into emerging markets like India,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
However, Vijayakumar cautions that the elevated valuations are still a concern. If the US growth concerns impact global equity markets in the coming days, FPIs are likely to use the opportunity to buy in India.
FPI flows are influenced by various factors beyond bond inclusion. Key elements affecting investment decisions include geopolitical developments, the health of the U.S. economy, Yen borrowings, and prevailing risk-off strategies.
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“Global market sentiment has notably shifted towards caution, as evidenced by Nvidia’s 25% decline after reaching a record high in June. Concerns over a potential U.S. recession and China’s ongoing economic challenges are critical considerations for investors re-evaluating their allocations,” believes Sunil Damania, Chief Investment Officer at MojoPMS.
If the risk-off strategy continues to gain traction, emerging markets may experience a slowdown in FPI inflows, Damania added.
FPI is seen as crucial because it enhances market liquidity and provides essential capital inflows, which support economic growth and stability. Additionally, it contributes to market efficiency and reflects international confidence in a country’s financial system.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
