New Delhi: Foreign portfolio investor (FPI) flows into Indian equities are showing signs of turning more consistent, with early indications pointing to continued net inflows in September after positive flows in July and August.
FPIs have remained net buyers of Indian equities during the first four days of September, with net inflows standing at around Rs 2,374 crore. Commenting on it, Dr V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited said the tapering of the chip trade and FPIs turning consistent sellers in semiconductor stocks in South Korea and Taiwan have played an important role in redirecting foreign capital towards India.
He said the resilience of the Indian economy, reflected in the stronger-than-expected 7.8 per cent GDP growth recorded in the first quarter of FY27, could further support foreign investor interest.
Better-than-expected first-quarter earnings and the recent stabilisation of the rupee are also positive factors that could help sustain FPI inflows into Indian markets.
A major factor supporting the rupee has been the large inflow of foreign currency through the FCNR(B) deposit scheme. Experts said the massive $127 billion that came into India under the scheme has strengthened the rupee significantly, with the currency appreciating from a low of 96.96 to the dollar in May to 94.49 on September 4.
According to them, the rupee’s strengthening is particularly significant from the perspective of foreign portfolio investors, as currency stability can improve the attractiveness of Indian assets by reducing concerns over potential exchange-rate losses.
However, the sustainability of FPI inflows will increasingly depend on global bond yields, which have been moving higher.
“The FPI flows will be primarily influenced by the bond yields which are rising globally,” he said.
Experts said that the coming weeks, however, are likely to be crucial for determining whether the recent turnaround in FPI flows develops into a sustained trend, with global bond yields, US monetary policy and currency movements expected to remain key factors influencing foreign investor decisions.
(IANS)
