FPIs stay invested in Indian equities; put in Rs 43,800 cr this month

Indian equity markets continue to draw foreign portfolio investments as foreign investors put in Rs 43,800 crore in July so far on stable macroeconomic fundamentals, steady earnings growth and challenges faced by the Chinese economy.

With this, inflow in the equity market reached Rs 1.2 trillion so far this year, data with the depositories showed.

Market analysts are of the view that the outlook for FPI inflows into Indian equities remains quite bright and broad-based.

The concern, however, is the rising valuations. At high valuations, some negative triggers can lead to a sharp correction, V K Vijayakumar, Chief Investment Strategy at Geojit Financial Services, said.

Persistent flows from FPIs have led Indian equity markets to surge to their all-time high levels. Therefore, intermittent profit booking cannot be ruled out going ahead, Himanshu Srivastava, Associate Director - Manager Research at Morningstar India, said.

According to the data, FPIs have been continuously buying Indian equities since March and infused Rs 43,804 crore this month (till July 21).

This also marks the third straight month, when the net flows have surpassed Rs 40,000 crore mark. It was Rs 47,148 crore in June and Rs 43,838 crore in May.

This figure includes investment through bulk deals and primary market too, apart from investment through stock exchanges.

Before March, overseas investors pulled out Rs 34,626 crore collectively in January and February.

"Steady earnings growth recovery, stable macroeconomic fundamentals, the challenges faced by the Chinese economy, and concerns over its recovery are the major drivers for the foreign flows into Indian equities," Srivastava said.

While the global economic landscape remains uncertain, India's strength in the micro economy, attractive valuations, and promising corporate earnings indicate the potential for sustained growth and investment opportunities, Mayank Mehraa, Smallcase manager and principal partner at financial consultancy Craving Alpha, said.

India is the largest recipient of FPI flows year-to-date among emerging markets, Geojit's Vijayakumar said.

Apart from equities, overseas investors injected Rs 2,623 crore into the Indian debt market during the period under review.

In terms of sectors, FPIs continue to invest in financials, automobiles, capital goods, realty, and FMCG.