Foreign Investors Return: Rs 12,170 Crore Boost in Indian Equities

Foreign investors have infused Rs 12,170 crore into Indian equities in June, driven by policy reform expectations and economic growth. Despite previous withdrawals due to tax treaty concerns and US bond yields, positive sentiments arise from ongoing government reforms and pro-growth budget anticipation.

In a compelling resurgence after the general election results, foreign investors have injected Rs 12,170 crore into Indian equities in June. This surge is primarily fueled by the anticipation of sustained policy reforms and robust economic growth.

Previously, investors had pulled out a net Rs 25,586 crore in May amid election uncertainties and an additional Rs 8,700 crore in April due to concerns over a modification in India's tax treaty with Mauritius and rising US bond yields.

Sunil Damania, Chief Investment Officer at MojoPMS, predicts that foreign portfolio investors (FPIs) might remain cautious due to the high valuations currently observed in the Indian equity market. Damania highlighted three crucial reasons for the renewed foreign interest: the continuity of government policies, the slowdown in the Chinese economy reflected by a significant drop in copper prices, and substantial block deals.

Though these FPI inflows are concentrated in selected stocks, the overall sentiment is buoyed by the anticipation of a pro-growth budget. Early indicators show FPIs leaning towards financial services, telecom, and realty sectors while reducing investments in FMCG, IT, metals, and oil and gas. Additionally, FPIs have been investing heavily in the debt market, with a notable total investment of Rs 64,244 crore, apart from a minor withdrawal in April.