Foreign investments surge into Indian equities with record Rs 57,359 crore inflow in September

Foreign investors have made a remarkable return to the Indian equity markets, injecting Rs 57,359 crore in September alone. This influx marks the highest level of foreign portfolio investment (FPI) in nine months and has propelled total FPI investments in Indian equities to over Rs 1 lakh crore for the year 2024, according to data from depositories as detailed in a Press Trust of India report.

The surge in investment is largely attributed to a recent interest rate cut by the US Federal Reserve the report further stated. Analysts suggest that this easing of global interest rates, coupled with India's robust economic fundamentals, will likely sustain FPI inflows moving forward. Robin Arya, founder and CEO of research analyst firm GoalFi, noted that the Reserve Bank of India's (RBI) policies on inflation and liquidity will be crucial in maintaining this positive trend.

As of September 27, FPIs recorded a net investment of Rs 57,359 crore in equities, with one trading session still remaining in the month. This figure represents the highest net inflow since December 2023 when FPIs invested Rs 66,135 crore. After withdrawing Rs 34,252 crore during April and May, FPIs have consistently returned to the market since June, demonstrating a strong buying trend throughout most of 2024.

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Several factors have contributed to this revival in FPI interest. The commencement of an interest rate cut cycle by the US Federal Reserve has enhanced liquidity in Indian markets. Additionally, India's increasing weightage in global indices and promising growth prospects have attracted foreign investors. Himanshu Srivastava from Morningstar Investment Research India highlighted that a series of large initial public offerings (IPOs) has also played a significant role in drawing foreign capital.

The recent 50 basis points rate cut by the US Fed on September 18 has further increased liquidity within Indian markets. Manoj Purohit from BDO India explained that this interest rate differential is expected to lure more FPI investments into India. Bharat Gala, COO of Ventura Securities, added that numerous mainboard IPOs with appealing valuations have opened new opportunities for foreign money.

The PTI report further stated that, in terms of performance across markets, Hong Kong emerged as a standout performer in September with its Hang Seng index rising by 14 per cent. Analysts predict that China's monetary and fiscal stimulus measures will bolster its economy and benefit Chinese stocks listed in Hong Kong. VK Vijayakumar from Geojit Financial Services stated that if the Hang Seng continues its upward trajectory, it may attract additional funds into this undervalued market.

In the debt segment, FPIs infused Rs 8,543 crore through the Voluntary Retention Route (VRR) and Rs 22,023 crore via the Fully Accessible Route (FRR) during September. With declining US bond yields making Indian government securities more attractive due to higher yields and liquidity, GoalFi's Arya noted that sustained foreign participation is likely through both VRR and FRR routes. The RBI's supportive approach towards debt markets is also expected to foster continued foreign investment activity.