FPIs Pour Rs 32,365 Cr into Indian Equities in July Amid Policy Reforms and Strong Earnings Season

In July, foreign portfolio investors (FPIs) put Rs 32,365 crore into Indian equities, driven by expectations of continued policy reforms, strong economic growth, and a better-than-expected earnings season. However, during the first two trading days of August, they withdrew Rs 1,027 crore, according to data from depositories.

There has been a mixed response from FPIs since the budget announcement, which included an increase in capital gains tax on equity investments.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that future FPI trends will depend on developments in the US economy and markets. He explained that recent weaker-than-expected employment data and a slowing economy make it likely that the US Federal Reserve will cut interest rates in September. Vaibhav Porwal, Co-founder of Dezerv, mentioned that there’s speculation about a potential 50 basis points cut in interest rates.

Data shows that FPIs have been fluctuating in their investments. In June, they invested Rs 26,565 crore, encouraged by political stability and a sharp market rebound. However, in May, they withdrew Rs 25,586 crore due to election-related uncertainties, and in April, they pulled out over Rs 8,700 crore due to concerns about changes to India’s tax treaty with Mauritius and rising US bond yields.

Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment Research India, attributed the resurgence in FPI investment to factors such as steady economic growth, government infrastructure initiatives, and a strong earnings season that has improved corporate India’s balance sheets. Additionally, upward revisions in India’s GDP forecast by the IMF and ADB, along with a slowdown in China’s economy, have also been favorable for India.

FPIs also invested Rs 22,363 crore in the Indian debt market in July, bringing the total debt investment for the year to Rs 94,628 crore.