FPIs Inflow in equities drops to Rs 7320 crore in August on higher valuations: Foreign investors, i.e. FPIs, adopted a cautious approach and invested only Rs 7,320 crore in the domestic stock market in August. Apart from shares, they invested Rs 17,960 crore in the bond market during this period.They have adopted a cautious stance amid high valuation of shares and the end of the yen carry trade – i.e. borrowing money from a country with low interest rates and investing in the assets of another country – after the Bank of Japan raised interest rates.
According to depository data, this investment is much less than Rs 32,365 crore in July and Rs 26,565 crore in June. Vipul Bhowar, Director (Listed Investments), Waterfield Advisors, said that FPIs are likely to remain interested in the domestic market in September. However, capital flow is expected to be guided by domestic political stability, economic indicators, global interest rate conditions, market valuations, regional preferences and attractiveness of the bond market.
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According to depository data, foreign portfolio investors (FPIs) made a net investment of Rs 7,320 crore in Indian equities in August. The basic reason for the reduced interest of FPIs compared to the last two months is the high valuation in the Indian market. Nifty is trading at more than 20 times the estimated earnings of FY 2024-25. With this, India is now the most expensive market in the world.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that foreign investors have opportunities to invest in very cheap markets and hence, their preference is markets other than India. Apart from this, the expiry of Yen carry trade on August 24 had a great impact on FPI behavior, leading to massive selling in domestic equities. Interestingly, foreign investors are selling in the stock market, where valuations are considered high. They are investing their investments in the primary market, where valuations are relatively low.
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Apart from shares, foreign investors invested Rs 17,960 crore in the bond market in August. Experts believe that inclusion in global bond indices, attractive interest rates, stable economic growth and favorable long-term outlook have been the major factors motivating FPIs to invest in bonds.
Nimesh Chandan, Chief Investment Officer, Bajaj Finserv Asset Management, said that India’s inclusion in global bond indices and attractive yields have attracted capital inflows. Apart from this, FPIs are mainly buying in the bond market as the Indian rupee has remained stable this year and this stability is expected to continue. With this, FPI investment in equity has reached Rs 42,885 crore and in the bond market to Rs 1.08 lakh crore so far in 2024.
