Foreign portfolio investors (FPIs) have set a new record by pumping Rs 2.9 lakh crore into Indian equities in June. This surge in investments surpasses the previous record set in December 2020. While FPIs booked considerable profits, the net FPI investment in June was Rs 47,148 crore, the highest in 10 months. This article explores the driving factors behind FPIs’ increased investment in India and the implications for the country’s economy.
One of the major reasons for the FPI rush into India is the country’s outperformance in the equity markets. In the last three months, benchmark indices in India have risen by 12%, making it one of the best-performing large economy equity markets. Moreover, India’s year-to-date returns have swung to positive, with a 6% increase.
Several key factors are attracting foreign investors to India. Firstly, expectations of global interest rates peaking have led investors to seek better returns in emerging markets like India. Additionally, countries like India, Brazil, and China are no longer seen as having inflation issues, which further boosts investor confidence. Asia, particularly India, has emerged as a top choice for diversification due to its relatively stable macro environment. Furthermore, the Indian rupee has remained one of the most stable currencies in Asia year-to-date.
Looking ahead, inflows into Indian equities are expected to continue for a while. Morgan Stanley predicts that emerging markets, including India, will be the winners of this decade, citing attractive valuations and a superior growth outlook. With India’s positive performance in the equity markets and its strong macroeconomic fundamentals, it is likely to remain a preferred choice for foreign investors.
In conclusion, foreign portfolio investors have made significant investments in Indian equities in June, setting a new record. India’s outperformance in the equity markets, along with several key factors such as expectations of global interest rates peaking and a stable macro environment, have attracted foreign investors. The inflows into Indian equities are expected to continue, making India a top choice for diversification and long-term growth.
