Foreign Portfolio Investment in India’s Stock Market: A September Surge
In September, foreign portfolio investors (FPIs) have made significant investments in the Indian stock markets, totaling approximately ₹33,700 crore. This influx can largely be attributed to a confluence of factors, including the recent reduction of interest rates by the Federal Reserve in the United States and the overall resilience of the Indian market. This month’s investment figure marks the second highest for any month this year, trailing only behind March’s ₹35,100 crore investment.
Reasons Behind the Investment Spike
As of September 20, FPIs recorded a net investment of ₹33,691 crore in Indian shares. With this recent boost, their total investment in equities for the year has reached ₹76,572 crore. Experts speculate that this aggressive buying trend is likely to persist in the coming days, especially following the Federal Reserve’s decision to cut the key interest rate by 0.50 percent on September 18.
Factors Attracting FPIs to the Indian Market
Robin Arya, the Founder and CEO of GoalFi, a research analyst firm, noted that the weakening US dollar and the Federal Reserve’s monetary policies are making the Indian stock market increasingly attractive to FPIs. Additionally, Manoj Purohit, Partner and Leader at BDO India, highlighted that several elements are enhancing India’s appeal for foreign investments:
- Balanced Fiscal Deficit: The government’s management of fiscal health adds to confidence in the economy.
- Impact of Rate Cuts: The influence of US rate cuts on the Indian rupee has bolstered its strength.
- Strong Valuations: Attractive stock prices in a favorable economic environment draw global investors.
- RBI’s Inflation Control Stance: The Reserve Bank of India’s commitment to managing inflation reassures investors.
- Positive Outlook on IPOs: Recent Initial Public Offerings (IPOs) have further piqued the interest of foreign funds.
Investment in the Bond Market
In addition to equities, FPIs have shown a notable interest in the bond market this month, investing ₹7,361 crore through the Voluntary Retention Route (VRR). This route encourages long-term investments from foreign entities. Moreover, ₹19,601 crore has been allocated under the Fully Accessible Route (FAR), which aims to enhance liquidity and accessibility for foreign investors in Indian debt securities.
Conclusion
The ongoing investments by FPIs signal a robust confidence in the Indian market, driven by favorable economic indicators and strategic government policies. With the expected continuation of this trend, the Indian stock and bond markets may witness further growth, contributing to a more dynamic investment landscape.
