₹86,000 Cr FPI Inflows Surge in July-Sept: Record High Since Dec 2020, Driven by MSCI India Index and Global Market Gains

Foreign investors have pumped over ₹86,000 crore into Indian stocks during the July-September quarter of 2024, marking the highest inflow in 15 quarters. This surge in investments was primarily driven by India’s increased weighting in global indices such as MSCI and FTSE, as well as the strong performance of Indian markets.

Additionally, the US Federal Reserve’s rate cut in mid-September also played a key role in attracting foreign portfolio investors (FPIs) to India. The last time such high foreign inflows were seen was in the December quarter of 2020 when FPIs invested about ₹1.43 lakh crore into Indian stocks.

Moderate FPI Activity in Early 2024

During the first half of 2024, foreign funds showed more caution when investing in Indian equities due to concerns about high valuations and the tight monetary policy in the United States. However, as the dollar weakened after the rate cut in the US, and with India’s increased weight on global indices, foreign investors began boosting their investments in Indian stocks.

India’s Strong Performance in MSCI Index

India’s MSCI index has seen a significant rise of 26% so far this year, which is considerably higher than the 13% increase in the MSCI Emerging Market index during the same period. This outperformance has led to more Indian companies being added to global indices like MSCI EM and MSCI IMI, while underperforming Chinese stocks have had their weights reduced.

As a result, India’s weight in the widely-watched MSCI Emerging Market index has risen to 20.7%, while China’s weight has dropped to 23.74%.

Foreign Investors Flock to Primary Markets

Foreign investors have also been active in India’s primary market, which includes initial public offerings (IPOs). In 2024, foreign portfolio investors have contributed over ₹65,000 crore to the primary market, compared to ₹33,000 crore that was invested in the secondary market.

The increased FPI activity in the primary market, especially in IPOs, reflects the growing confidence of overseas investors in India’s long-term economic prospects.