NEW DELHI:
Foreign investors
made a strong comeback by infusing over Rs 2 lakh crore into
equities
in the fiscal year 2023-24, primarily due to optimism about India’s strong
economic fundamentals
.
In the current fiscal year, Foreign Portfolio Investors (
FPIs
) made a net investment of around Rs 2.08 lakh crore in
Indian equities
and Rs 1.2 lakh crore in the
debt market
.
Collectively, they infused Rs 3.4 lakh crore into the capital market.
This resurgence follows a period of outflow from equities in the previous two financial years. In 2022-23, there was a net outflow of Rs 37,632 crore from Indian equities by FPIs due to global central bank rate hikes.
Prior to that, a significant outflow of Rs 1.4 lakh crore was recorded. However, in 2020-2021, FPIs made a record investment of Rs 2.74 lakh crore.
FPIs started the fiscal year 2023-24 positively, with continuous equity purchases till August, reflecting confidence in the Indian economy. However, they turned net sellers in September and October, with significant outflows during these months.
November saw a return to net investments by FPIs, and the optimism carried through to December, where they bought equities worth Rs 66,135 crore. In January, there was a slight pullback, possibly due to shifting investments towards China after its lockdown.
Despite initial interest in China, FPIs struggled to maintain investments, leading to a positive end to the fiscal year as they bought shares worth over Rs 35,000 crore in March.
The influx of foreign investments was influenced by factors such as inflation and interest rates in developed markets, currency fluctuations, crude oil prices, geopolitical conditions, and the domestic economy’s health, said Himanshu Srivastava, associate director – manager research at Morningstar Investment Research India.
Investors were drawn to Indian equities for their demonstrated resilience during uncertain times. Compared to similar markets, India’s economy stood out as more stable amidst global economic challenges, attracting foreign investment, Srivastava added.
The outlook for FY25 from an FPI perspective, continues to remain strong, Naveen KR, smallcase manager and senior director at Windmill Capital, said.
Naveen further highlighted the economic struggles in countries like the UK, Japan, Russia, and Ukraine, along with the inflation debate in the USA and China’s global position. Amidst these challenges, India’s strong GDP growth has positioned it as a favorable investment destination.