FPIs inflow hit 9-month high in equities in Sept, surpasses Rs 1trn mark

Foreign investors have poured Rs 57,359 crore into Indian equities in September, making it the highest inflow in nine months, mainly driven by a rate cut by the US Federal Reserve.

With this infusion, foreign portfolio investors' (FPIs) investment in equities has surpassed the Rs 1 lakh crore mark in 2024, data with the depositories showed.

Going ahead, FPI inflows are likely to remain robust, driven by global interest rate easing and India's strong fundamentals. However, the RBI's decisions, particularly regarding inflation management and liquidity, will be key in sustaining this momentum, Robin Arya, smallcase Manager and founder & CEO of research analyst firm GoalFi, said.

According to the data, FPIs made a net investment of Rs 57,359 crore in equities until September 27, with one trading session still left this month.

This was the highest net inflow since December 2023, when FPIs had invested Rs 66,135 crore in equities.

Since June, FPIs have consistently bought equities after withdrawing Rs 34,252 crore in April-May. Overall, FPIs have been net buyers in 2024, except for January, April, and May.

Several factors have contributed to the recent surge in FPI inflow into Indian equity markets, such as the start of the interest rate cut cycle initiated by the US Fed increased India weightage in global indices, better growth prospects, and a series of large IPOs, Himanshu Srivastava, Associate Director- Manager Research, Morningstar Investment Research India, said.

The 50 basis points rate cut by the US Fed on September 18 increased the liquidity in the Indian markets since the Indian rupee was aided by currency fluctuations. This interest rate differential is expected to attract more FPI inflows into India, Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India, said.

"With quite a few mainboard IPOs with healthy valuations listing on the stock market, foreign money has been flowing in for the new opportunities," Bharat Gala, COO of Equity broking- Ventura Securities, said.

In terms of FPI inflows, the Hong Kong market was the top performer in September, with the Hang Seng index rising 14 per cent.

China's monetary and fiscal stimulus is expected to boost its economy, benefiting Chinese stocks listed in Hong Kong. If the Hang Seng continues to outperform, more funds may flow into the still undervalued market, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

In the debt markets, FPIs infused Rs 8,543 crore through the Voluntary Retention Route (VRR) and Rs 22,023 crore via the Fully Accessible Route (FRR) in September.

With US bond yields on the decline, Indian government securities under the FRR have become particularly attractive to foreign investors, offering higher yields and liquidity, GoalFi's Arya said.

The RBI's supportive stance on debt markets, along with its focus on maintaining a stable yield environment, has encouraged sustained foreign participation through both VRR and FRR routes, he added.