In a significant turn of events, India’s financial markets have witnessed a robust recovery driven by newfound political stability and aggressive retail investment, prompting foreign portfolio investors (FPIs) to reverse their recent trend of selling.
According to market experts, FPIs injected a substantial Rs 26,565 crore into Indian equities in June, marking a stark departure from their previous strategy.
The shift in FPI sentiment underscores a growing recognition among global investors of India’s resilience and performance potential.
Market analysts however attribute this reversal to FPIs recognizing the risks of missing out on gains in one of the world’s top-performing markets.
“Continued FPI buying hinges on stability in US bond yields,” cautioned experts, highlighting the sensitivity of global investor sentiment to macroeconomic factors.
Early June data from the National Securities Depository Limited (NSDL) reveals FPIs focusing their investments on sectors such as real estate, telecommunications, and financials, while reducing exposure to IT, metals, and oil and gas sectors.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized the positive impact of India’s inclusion in the JP Morgan Bond Index.
“Debt inflows in 2024 have already reached Rs 68,674 crore, promising reduced borrowing costs for the government and corporations, thereby boosting economic prospects and equity markets,” he commented.
Despite the optimistic outlook, analysts caution that FPI inflows may be tempered by the high valuations currently prevalent in the Indian equity market.
Foreign investors are selectively divesting from sectors with lofty valuations in favor of those offering more attractive entry points.
Looking ahead, market sentiment remains cautiously optimistic, contingent on sustained domestic stability and favorable global economic conditions that could further bolster investor confidence in India’s growth story.
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