In a significant boost to India’s economic prospects, foreign portfolio investors (FPIs) have poured approximately ₹52,910 crore into the Indian equity and debt markets this month, up until July 26. This influx highlights FPIs’ ongoing confidence in India’s financial landscape as the nation aims to solidify its position as the third-largest global economy.
According to data from the National Securities Depository Limited (NSDL), FPIs have allocated ₹33,688 crore to equity investments and ₹19,222 crore to debt securities thus far in July. For the year-to-date, total FPI investments in Indian equity stand at ₹36,888 crore, while debt investments have reached ₹87,846 crore.
Union Budget 2024-2025
Market analysts attribute this substantial investment to the Union Budget 2024-2025, which aims to create a stable and mature investment environment. The budget’s focus on capital allocation and policy measures expect to enhance growth across various sectors, contributing to long-term economic expansion.
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While the budget proposes an increase in short-term capital gains (STCG) tax from 15% to 20% and long-term capital gains (LTCG) tax from 10% to 12.5%, experts from Pantomath Capital Advisors believe that these changes will have a minimal impact on overall investment sentiment. They argue that the long-term outlook for the equity market remains positive, with FPI inflows expected to continue unabated.
Rebound in Capital Market
Analysts point out that the government’s assurance of continued reforms and positive sentiment has spurred a rebound in capital markets. The comprehensive review of the indirect tax rate structure and the proposed changes to address duty inversion and reduce disputes are expected to facilitate smoother trade operations.
Moreover, the Indian economy’s growth trajectory remains robust, with improvements in manufacturing sentiment during the April-June quarter and strong demand conditions bolstered by favorable monsoon progress.
A recent survey highlights that business activity has accelerated to a three-month high in July, driven by a surge in the services sector and a pick-up in manufacturing, leading to the fastest pace of hiring in 18 years. With a growth rate exceeding 8% in 2023-24, India continues to be the fastest-growing major economy globally, showcasing its economic resilience and potential.
