Foreign investors have invested ₹27,856 crores in Indian equities in the first fortnight of this month alone, signalling the strength of India’s markets and strong confidence in its economic horizon.
This latest information continues the line that started in June, reflecting a continued increase in foreign portfolio investors (FPI) need for Indian equities. Before this wave, FPIs had stretched out an amount of ₹34,252 crore in April and May, making this turnaround especially noteworthy.
What’s fuelling this investment frenzy?
India’s economic power is occurring as a draw for global investors. With better growth metrics than many other economies, it is difficult to fight the allure of India. The International Monetary Fund (IMF) has launched strong GDP growth for the country, offering a prospect for investors looking for high returns.
Himanshu Srivastava, associate director, manager research at Morningstar Investment Research India, highlighted India’s economic resilience as a major attraction. “In a world grappling with economic tensions, India shines with its solid infrastructure and upward growth trajectory,” he commented, reflecting a belief echoed in financial circles.
Record-setting investments in 2023
Depository data shows FPIs have invested a net ₹27,856 crore into Indian equities this month through September 13, taking total FPI investments in Indian equities to ₹70,737 crore so far in 2023.
VK Vijayakumar, chief investment strategist, Geojit Financial Services, attributes the overflow to India’s market dynamics.
“The strength and vitality of the Indian market makes it an captivating attraction for FPIs,” Vijayakumar said, underlining the country’s economic vitality.
Global economic tides and their impact
The global economic outlook, covered by fears of a recession in developed markets, has prompted investors to turn to growth-rich arising economies like India. Meanwhile, the U.S.
The Federal Reserve’s monetary policy remains the central theme, with expectations of an immediate rate cut decreasing due to ongoing inflationary pressures.
Recent data shows that the U.S. Inflation remains always above the Federal Reserve’s target, producing a more mindful approach to rate adjustments. While the Fed has indicated at a delay in rate hikes, the likelihood of a close rate cut appears low.
Confidence in India’s economic horizon
Despite talks of overvaluation in the Indian market, the substantial inflows reflect deep confidence among foreign investors. Manoj Purohit, partner and leader of FS Tax, tax and regulatory services at BDO India, highlights the reasons for this optimism.
“The strong investment reflects global confidence in India’s economic outlook and the government’s commitment to continued growth,” Purohit said. He said FPIs are taking advantage of positive market view and political strength, which are fueling the ongoing uptrend.
Regulatory friendliness and investor opinion India’s appeal has been further supported by many regulatory reforms to reduce the way for FPIs.
Ease of doing business, targeted tax reforms and ambitious infrastructure projects have increased opportunities for global investors, placing India as a major destination for capital. Investments beyond equities also rise Foreign investors are not just betting on equities.
In the first half of September, FPIs invested ₹7,525 crore in debt via the voluntary retention route. They also infused an additional ₹14,805 crore into government debt securities under the fully accessible route (FAR), which also reflects their confidence in India’s fixed income outlook.
What’s in store for the future?
The trajectory of FPI flows in the future will depend on a number of complex factors, from global economic currents to central bank moves and domestic developments. While the US economy is expected to remain volatile, the US economy is likely to remain volatile.
While the Federal Reserve’s policy stance remains an important consideration, India’s solid economic fundamentals are likely to continue to push investment flows.
Market analysts stay hopeful about India’s prospects, driven by strong domestic consumption and aggressive government measures.
However, they warn that global economic uncertainties and geopolitical tensions could cast a shadow over this otherwise bright outlook. Conclusion Substantial inflow of foreign capital into Indian equities is a great support to India’s economic journey.
With a resilient domestic market supported by strategic government initiatives, India continues to attract FPIs looking for avenues of growth.
As the global economic story grows, investors will be keenly keeping an eye on central bank actions and appearing market dynamics. At present, India’s market strength and optimistic view are attracting foreign investors who are keen to invest.
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Disclaimer
This article is intended for informational purposes only and does not constitute financial advice. Investors are advised to conduct their own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not liable for any losses or damages arising from the use of this information.
