FPIs turned net buyers in July, investing ₹20,200 crore in Indian equities after four straight months of net selling.
Improving Q1 earnings, attractive valuations and India's resilient macroeconomic outlook drove the return of foreign investors.
Analysts expect FPI flows to remain influenced by US rates, geopolitical developments and domestic earnings, inflation and growth trends.
Foreign Investors End Four-Month Selling Streak With ₹20,200 Cr July Buying
Improving corporate earnings, attractive valuations and India's relatively stable macroeconomic outlook helped overseas investors return to domestic equities after four months of net selling
Foreign Investors End Four-Month Selling Streak With ₹20,200 Crore July Buying
Summary
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Foreign portfolio investors (FPIs) turned net buyers of Indian equities in July, investing ₹20,200 crore after remaining net sellers for four consecutive months, as improving corporate earnings, resilient economic fundamentals and attractive valuations revived overseas interest in domestic stocks.
The inflows marked a sharp reversal from the March-June period, when FPIs consistently pulled money out of Indian equities amid concerns over elevated global interest rates, geopolitical uncertainties and relatively expensive valuations.
According to NSDL data, FPIs purchased ₹20,199 crore worth of equities during July, including ₹6,731 crore through exchanges and ₹13,467 crore through the 'primary market and others' category.
Earnings Revival, Attractive Valuations Drive Inflows
Market participants attributed the return of foreign investors to healthy June-quarter corporate earnings, easing inflationary pressures and India's resilient macroeconomic environment.
The correction in equity valuations over recent months has also made Indian stocks more attractive for global investors seeking long-term growth opportunities in emerging markets.
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Despite lingering geopolitical uncertainties and volatility in global markets, India continued to stand out because of its stable economic growth, strong domestic demand and improving earnings outlook.
Domestic institutional investors (DIIs) remained aggressive buyers during July, investing ₹35,099.25 crore in Indian equities.
Their continued participation helped support the market and offset foreign selling in previous months, while the simultaneous buying by both DIIs and FPIs significantly improved overall market sentiment.
Stable Rupee, AI Trade Shift Aid India
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said there is a clear shift in FPI flows towards India.
He noted that apart from the ₹20,199 crore equity inflows, foreign investors also invested ₹29,211 crore in debt through the General Limit category during July.
According to Vijayakumar, excessive volatility in markets such as South Korea and Taiwan, coupled with concentration risks associated with the global semiconductor trade, has prompted foreign investors to diversify towards relatively stable markets like India.
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He added that the stability of the rupee, fair valuations in India's large-cap stocks and increasing interest in mid- and small-cap companies because of their higher growth potential have also contributed to the revival in FPI inflows.
Focus Turns To Global Developments
Going forward, analysts expect foreign investment flows to remain sensitive to global factors, including the trajectory of US interest rates, geopolitical developments and overall risk appetite.
On the domestic front, corporate earnings, inflation trends and broader economic indicators will remain key drivers of investor sentiment.
While near-term FPI flows may remain volatile, analysts believe India's strong macroeconomic fundamentals, policy continuity, infrastructure spending and long-term growth prospects should continue to support overseas investment into domestic equities.