Foreign portfolio investors (FPIs) have continued to buy Indian equities in August, supported by expectations of stronger economic growth, improving corporate earnings, and stability in the rupee. Buying stood at Rs 23,543 crore so far this month till August 22, according to reports from the Free Press Journal and Lokmat Times. Of this, Rs 14,117 crore came through stock exchanges, while Rs 9,426 crore was invested through the primary market and other categories.
What is bringing FPIs back?
Market experts told the Free Press Journal and Lokmat Times that several factors are encouraging foreign investors to return to Indian equities. These include signs of an earnings recovery in first-quarter results, stability in the rupee, and better growth prospects for companies in the broader market. A shift by foreign investors away from the global "chip trade" is also supporting flows into India. Analysts are quoted as saying FPIs are likely to sustain the buying trend amid improvements in India's GDP growth and earnings growth outlook.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said FPIs are not focusing on attractively valued large banking and IT stocks. Instead, they are selectively buying mid-cap stocks despite relatively high valuations. However, elevated US bond yields remain a major concern, as higher yields can reduce the attractiveness of equities. Dr Vijayakumar described high US bond yields as a headwind and negative for equities.
Markets remain cautious
Despite the inflows, Indian equity markets ended the week on a cautious note, extending their recent corrective phase as elevated crude oil prices, rising global bond yields, and persistent geopolitical uncertainty weighed on investor sentiment. Benchmark indices saw volatility during the week and recovered from some losses before ending Friday largely flat, as reported by both the Free Press Journal and Lokmat Times.
Ajit Mishra, SVP, Research at Religare Broking Ltd, said investors are closely watching the US Federal Reserve's policy outlook, with signals from the Jackson Hole symposium expected to influence global markets. He said monetary policy guidance from the symposium is expected to remain a key global market catalyst.
Sectoral performance mixed
Sectoral performance was mixed, with defensive positioning and stock-specific buying dominating market activity, according to Lokmat Times. Realty, metals, and banking stocks performed relatively better, supported by selective buying and improving sentiment towards these segments. IT stocks, however, fell around 2.6 percent during the week amid concerns over US inflation, high bond yields, and the global technology spending outlook. FMCG and energy stocks also remained subdued.
Analysts said investors will track crude oil prices, rupee movements, foreign institutional flows, and domestic liquidity conditions in the coming weeks.