FPIs Pump ₹90,000 Cr into Indian Equities in H1FY25, Record September Inflows Boost Market Buzz

Foreign Portfolio Investors (FPIs) have continued to show strong interest in Indian stock markets during the first half of the financial year 2024-25 (FY25), driven by improving economic conditions, lower inflation, and a significant rate cut by the US Federal Reserve.

In H1FY25, FPIs invested ₹89,717 crore in Indian equities, following record inflows of ₹2 lakh crore in FY24. September 2024 saw particularly high FPI investments, with ₹57,724 crore coming in—the largest monthly inflow since December 2023. This increase was largely due to the Fed’s aggressive rate cut, making Indian assets more appealing.

Despite the strong overall inflows, FPIs had mixed buying patterns in 2024. They were net sellers in four out of the nine months and buyers in the remaining five, with total inflows of ₹94,183 crore for the year so far.

The year began with a sell-off of ₹25,744 crore in January, followed by net buying in February and March, totalling ₹36,637 crore. However, in April and May, FPIs turned cautious due to India’s upcoming general elections, selling equities worth ₹8,671 crore and ₹25,586 crore, respectively.

In June, after the incumbent government led by Prime Minister Narendra Modi won the election, FPIs started buying again, with inflows continuing for four straight months. They invested ₹26,565 crore in June, ₹32,365 crore in July, ₹7,320 crore in August, and ₹57,724 crore in September.

However, rising geopolitical tensions, such as the conflict between Iran and Israel, could negatively impact this trend. In early October, FPIs withdrew ₹6,427 crore from Indian equities due to these tensions.

FPIs have also increased their investments in Indian debt markets. So far in 2024, they have invested ₹1.1 lakh crore in Indian debt, surpassing the ₹68,663 crore invested in 2023. In H1FY25 alone, FPIs bought Indian debt worth ₹54,389 crore.

Experts are cautiously optimistic about the future of FPI inflows. Aamar Deo Singh, Senior Vice President of Research at Angel One, believes that FPI investments could cross ₹1 lakh crore this year but warns that global factors like the US rate cut, inflation in India, and recession fears in the US could affect inflows.

Krishnan VR, Head of Quantitative Research at Marcellus, highlights that FPIs are sensitive to the difference between Indian and US bond yields. The US Federal Reserve’s guidance for a lower rate could reduce the risk of outflows, though India’s high valuations may limit further inflows compared to other emerging markets.

Despite the challenges, India’s rising prominence in global indices and favourable economic conditions could continue attracting FPI interest. However, investors should be aware of risks from changing global dynamics and geopolitical issues.