FPIs Pour Rs 33,600 Crore into Indian Equities in July Amid Policy Reforms and Robust Earnings: Geojit Financial Services Insights

Foreign investors have pumped over Rs 33,600 crore into Indian equities so far in July, driven by expectations of ongoing policy reforms, steady economic growth, and a strong earnings season. However, in the last three trading sessions (July 24-26), they pulled out more than Rs 7,200 crore following a government tax hike on Futures and Options (F&O) trades and capital gains from equity investments announced in the Budget.

Market Outlook

Market experts believe that Indian equities are well-positioned to attract foreign investments throughout the year, despite some monthly volatility due to short-term news. “The Indian equity and bond markets are favorably placed for the year, which should attract foreign flows. There may be some volatility in flows month-to-month due to short-term news,” said Nimesh Chandan, CIO of Bajaj Finserv AMC.

Investment Data

Data from depositories shows that foreign portfolio investors (FPIs) have made a net inflow of Rs 33,688 crore in equities this month (up to July 26). This follows an inflow of Rs 26,565 crore in equities in June, driven by political stability and a sharp market rebound. Before this, FPIs withdrew Rs 25,586 crore in May due to election uncertainties and over Rs 8,700 crore in April due to concerns about changes in India’s tax treaty with Mauritius and rising US bond yields.

Economic Strength

“India is on a strong economic footing, and the better-than-expected earnings season has improved corporate India’s balance sheet, boosting investor confidence. Additionally, there is growing anticipation of an interest rate cut by the US Federal Reserve in September,” said Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India.

Positive Trends

Revisions of India’s GDP forecast by the IMF and ADB, along with a slowdown in China, also favor India. A key trend over the last 30 months shows that whenever FPIs were consistent sellers, domestic institutional investors (DIIs) were consistent buyers.

Domestic Investor Strength

The large inflow of money into domestic mutual funds and the growing influence of retail investors have strengthened domestic investors compared to their foreign counterparts, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Debt Market Investments

Besides equities, FPIs invested Rs 19,223 crore in the debt market during the same period, bringing the total debt tally to Rs 87,847 crore for the year so far. With the inclusion of Indian bonds in international bond indices, foreign flows are expected to continue into the Indian bond market, likely pushing G-Sec yields lower, according to Bajaj Finserv AMC’s Chandan.