Global Chip Trade Slowdown Boosts India's Appeal, FPIs Remain Optimistic Despite Market Risks

Mumbai: A slowdown in the global semiconductor trade is emerging as a positive development for Indian equity markets, with foreign portfolio investors (FPIs) continuing to invest in the country even as global uncertainties persist.

FPI inflows stay strong

According to market data, FPIs invested Rs 14,945 crore in Indian equities through July 24. Of this, Rs 3,167 crore came through the secondary market, while a much larger Rs 11,778 crore flowed into the primary market.

Debt investments also remained healthy during the month. Analysts said recent tax reforms announced by the government have improved the attractiveness of Indian debt instruments for overseas investors.

Chip cycle shifts in India's favour

Market experts believe weakening demand in the global semiconductor trade has reduced investor interest in export-driven markets such as South Korea and Taiwan. As a result, India is increasingly being viewed as a relatively attractive destination for foreign capital.

Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said the cooling chip trade is favourable for India. However, he warned that the recent surge in Brent crude oil prices due to escalating tensions in West Asia could become a major concern if prices remain elevated for a prolonged period.

He added that a decline and stabilisation in crude oil prices could encourage FPIs to become consistent buyers of Indian equities.

Markets under pressure

Despite encouraging domestic fundamentals, Indian markets ended the week sharply lower. Rising crude oil prices, geopolitical tensions and continued foreign institutional investor (FII) selling kept investors cautious.

The Sensex fell 2.68 percent during the week to close at 76,059.77, while the Nifty declined 2.33 percent to settle at 23,767.45.

Ajit Mishra, SVP, Research, Religare Broking Ltd, said persistent FII selling, particularly in financial stocks, reflected investor caution amid higher bond yields and geopolitical uncertainties.

Meanwhile, India's foreign exchange reserves rose by USD 964 million to USD 675.16 billion, providing support to the country's external position.

Looking ahead, analysts expect markets to remain driven by global policy decisions, domestic macroeconomic data and the ongoing corporate earnings season.