Introduction: A Record Month for FPI Inflows
September 2024 has proven to be a scintillating month for foreign portfolio investors (FPIs), who poured nearly $7 billion into Indian equities. With net buying reaching approximately $6.85 billion, this marks the highest monthly inflow since December 2023, when FPIs invested $7.9 billion. The surge in investment underscores the strong foreign interest in Indian markets, positioning the country as a key destination for capital inflows in the current calendar year.
Significant Increase in FPI Net Buying
The recent data from the National Securities Depository Limited (NSDL) indicates a remarkable rebound in FPI activity. In contrast to the $873 million recorded in August, September’s inflows demonstrate a dramatic increase, highlighting a renewed confidence in the Indian market. Analysts attribute this uptrend to several factors, particularly dovish signals from the US Federal Reserve.
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the Fed’s rate cut on September 18 and its accompanying dovish commentary have played a crucial role in shifting investor sentiment. “The recent developments represent a pivotal shift in interest rates, driving sustained flows to emerging markets like India,” he stated.
Strong Performance in Indian Equities
For the calendar year 2024, FPIs have emerged as net buyers of Indian equities, accumulating over $12 billion so far. This robust trend is reflected not only in the equity market but also in the growing interest in Indian debt instruments. FPIs have committed $3.75 billion in September alone, bringing total debt investments in 2024 to an impressive $17.09 billion. Overall, FPI investments across various categories—including equity, debt, alternative investment funds (AIFs), mutual funds (MFs), and hybrid funds—have reached approximately $30.66 billion by September, surpassing last year’s total of $28.70 billion.
Mixed Trends in Emerging Markets
While India continues to attract significant FPI inflows, trends in other emerging markets have been mixed. Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted that Brazil faced marginal outflows of $0.02 billion, while South Korea experienced significant outflows of $5.09 billion. Taiwan and Vietnam also recorded outflows, amounting to $2.15 billion and $0.08 billion, respectively.
In contrast, other Southeast Asian nations like Indonesia and Thailand have seen positive inflows, with Indonesia receiving $1.81 billion and Thailand attracting $0.95 billion in 2024. Despite the mixed trends, India’s performance stands out as particularly strong in comparison.
Growing Interest in Indian Debt Markets
The growing appetite for Indian debt instruments is noteworthy, as FPIs have increasingly turned their focus to this sector. The inclusion of Indian bonds in JPMorgan’s bond index has further bolstered investor confidence, attracting substantial foreign capital. Krishna Appala, Senior Research Analyst at Capitalmind Research, commented on this trend: “With large-cap valuations still attractive and FIIs returning strongly, the market outlook remains positive.”
The diversification of investments across different asset classes—equities and debt—reflects a broader trend of confidence among foreign investors in the Indian economy’s resilience and growth prospects.
Competition from Hong Kong Amidst China’s Economic Stimulus
Despite the positive sentiment surrounding India, Vijayakumar cautioned that significant inflows into the Hong Kong market could impact investment dynamics. With a remarkable 14 percent gain in September, the Hong Kong market is benefiting from monetary and fiscal stimulus measures aimed at revitalizing the Chinese economy. If this outperformance continues, it could potentially redirect some funds away from India to Hong Kong, especially given the attractive valuations in that market.
Conclusion: Optimism for Future Investments
As September draws to a close, the surge in FPI inflows underscores the growing interest in Indian markets. The strong performance of both equities and debt instruments, coupled with favorable global conditions, positions India as an attractive destination for foreign investors. While competition from other emerging markets like Hong Kong poses a challenge, the overall outlook for foreign investments in India remains optimistic as we head into the final months of 2024.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna Sahu holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.
