Foreign Investors Keep Buying Indian Equities, Strong GDP Outlook And Earnings Revival Support FPI Inflows

New Delhi: Foreign portfolio investors (FPIs) continued to buy Indian equities in August, supported by expectations of stronger economic growth, improving corporate earnings and stability in the rupee.

FPI buying stood at Rs 23,543 crore so far this month till August 22. 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 said several factors are encouraging foreign investors to return to Indian equities. These include signs of an earnings recovery in the 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.

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.

Markets remain cautious

Indian equity markets ended the week cautiously as high crude oil prices, rising global bond yields and geopolitical uncertainty continued to weigh on sentiment.

Benchmark indices saw volatility during the week and recovered from some losses before ending Friday largely flat.

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.

IT stocks remain under pressure

Sectoral performance was mixed. Realty, metals and banking stocks performed relatively better as selective buying supported these sectors.

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.

Going forward, investors are expected to closely track crude oil prices, rupee movements, foreign fund flows and domestic liquidity conditions.