The Indian stock market witnessed a significant inflow of capital from Foreign Portfolio Investors (FPIs) in September, marking the continuation of a buying trend for the fourth consecutive month. This surge in investment was spurred by a critical interest rate adjustment by the US Federal Reserve, which reduced rates by 50 basis points. This favorable monetary climate encouraged FPIs to increase their stake in the Indian equity market, further establishing India as an attractive destination for foreign investment.
Per data from the National Securities Depository Ltd. (NSDL), FPIs injected an impressive ₹57,724 crore (about $6.89 billion) into domestic equities in September alone. Thus, total FPI investments in Indian stocks climbed to ₹89,717 crore during the first half of the financial year 2024-2025 (H1FY25), showcasing a robust interest in the Indian market.
However, the initial week of October marked a reversal in this trend, as FPIs offloaded a substantial ₹27,142 crore from Indian equities. This abrupt shift indicates potential concerns amid external market pressures and investor sentiment fluctuations in response to broader economic indicators.
The remarkable FPI activity in September had a significant effect on India’s benchmark indices, the Sensex and Nifty 50, propelling them to all-time highs. By September 27, the Sensex reached 85,978.25, while the Nifty 50 attained a peak of 26,277.35, reflecting the overall bullish market sentiment influenced by foreign investments.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the importance of the September 18 rate cut and the dovish statements from the US Federal Reserve, suggesting that these factors significantly influenced capital flow into emerging markets like India, potentially setting the stage for sustained investment growth.
FPI Buying Trends
The FPI buying spree was predominantly focused on the financial stocks, with an infusion of ₹27,200 crore into this sector in September. This influx marked a sharp turnaround from the outflows of ₹12,008 crore and ₹7,648 crore recorded in the preceding months of August and July, respectively, indicating renewed confidence among investors.
The Healthcare sector also drew considerable FPI investments, attracting ₹6,639 crore in September. This followed previous inflows of ₹5,831 crore in August and ₹5,054 crore in July, indicating a steady interest in health-related stocks, fueled by post-pandemic recovery phases.
Other notable sectors benefiting from FPI interest included Fast-Moving Consumer Goods (FMCG) with ₹4,900 crore in inflows, and Capital Goods, which recorded ₹4,002 crore. Investments in the Consumer Durables and Telecommunications sectors contributed an additional ₹3,736 crore and ₹1,935 crore, respectively.
FII Selling Trends
In contrast, the Consumer Services and Automobile sectors experienced the most significant FPI outflows in September 2024, with ₹2,940 crore withdrawn from Consumer Services and ₹2,106 crore from the Automobile and Auto Components sector. The latter saw a continuation from the previous month’s selloff of ₹2,379 crore.
The FPI sentiment towards the Information Technology (IT) sector also turned bearish, with net sales of ₹1,219 crore in September, a drastic change from the ₹4,036 crore net inflows noted in August.
Looking ahead, investors are bracing for the Q2 earnings season alongside the awaited monetary policy announcement from the Reserve Bank of India (RBI). Additionally, global developments, including the ongoing Israel-Iran conflict, fluctuations in the US dollar, and potential further rate reductions by the US Federal Reserve, will be crucial in influencing future FPI flows into the Indian stock market.
Disclaimer: The views and recommendations expressed above are those of analysts or brokerage firms and do not reflect the opinions of Mint. It is advisable for investors to consult certified experts before making any investment decisions.
