Introduction
Foreign Portfolio Investors Flock to Indian Equities Amid Rate Cut Expectations
Foreign Portfolio Investors (FPIs) have been pouring money into Indian equities, with a net investment of Rs 27,856 crore in the first fortnight of September. This surge in investment is attributed to the growing optimism around the potential interest rate cut in the US and the resilience of the Indian market.
FPIs’ Buying Spree
Foreign Portfolio Investors have been consistently buying equities since June, with a net investment of Rs 70,737 crore so far this year. The latest data from the depositories shows that FPIs put in a net investment of Rs 27,856 crore into equities this month (till September 13).
Reasons Behind FPIs’ Strong Buying
According to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, there are two major reasons for FPIs’ strong buying. Firstly, there is a consensus now that the US Fed will start cutting rates from this month onwards, pushing the US yields down. Secondly, the Indian market is extremely resilient with strong momentum and missing out on the Indian market would be a bad strategy for FPIs.
Indian Market Resilience
The Indian market has been resilient despite global challenges, with strong momentum and positive market sentiments. The government’s commitment to drive a long-term growth story has also contributed to the rally. "The robust inflows are due to underlying factors such as global confidence in India’s economic outlook and the government’s commitment to drive a long-term growth story. FPIs are encashing at the right time to tab the Indian market amidst positive market sentiments, political stability, contributing to the rally," said Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India.
Regulatory Reforms
A series of regulatory reforms aimed at streamlining the process for FPI investments has further uplifted investor sentiment. Apart from equities, FPIs invested Rs 7,525 crore in debt through the voluntary retention route in the first two weeks of September and Rs 14,805 crore in government debt securities designated under the Fully Accessible Route (FAR).
Conclusion
In conclusion, FPIs’ strong buying in Indian equities is driven by the growing optimism around the potential interest rate cut in the US and the resilience of the Indian market. With the focus shifting to the US Federal Reserve’s decision on interest rates in its upcoming FOMC meeting next week, its outcome will likely play a pivotal role in shaping the trajectory of future FPIs investments in Indian equities.
Frequently Asked Questions
Q1: Why are FPIs buying Indian equities?
FPIs are buying Indian equities due to the growing optimism around the potential interest rate cut in the US and the resilience of the Indian market.
Q2: What is the current net investment by FPIs in Indian equities?
The current net investment by FPIs in Indian equities is Rs 27,856 crore in the first fortnight of September.
Q3: What are the reasons behind FPIs’ strong buying in Indian equities?
According to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, there are two major reasons for FPIs’ strong buying. Firstly, there is a consensus now that the US Fed will start cutting rates from this month onwards, pushing the US yields down. Secondly, the Indian market is extremely resilient with strong momentum and missing out on the Indian market would be a bad strategy for FPIs.
Q4: What is the total investment by FPIs in Indian equities so far this year?
The total investment by FPIs in Indian equities so far this year is Rs 70,737 crore.
Q5: What are the regulatory reforms aimed at streamlining the process for FPI investments?
A series of regulatory reforms aimed at streamlining the process for FPI investments has further uplifted investor sentiment.
