Foreign Investors Injected Rs 33,600 Crore into Indian Equities in July, Pull Out Rs 7,200 Crore in Last Three Trading Sessions

Foreign investors have shown a strong interest in Indian equities this month, injecting over Rs 33,600 crore into the market. This surge in investment comes on the back of expectations of continued policy reforms, sustained economic growth, and a better-than-expected earnings season.

However, in the last three trading sessions, foreign investors pulled out over Rs 7,200 crore from equities following the government’s decision to hike taxes on Futures and Options trades (F&O) and capital gains from equity investments in the Budget. Despite this short-term setback, market experts believe that Indian equities are well-positioned to attract foreign investments throughout the year.

Nimesh Chandan, CIO of Bajaj Finserv AMC, stated, “Indian equity market and bond market are favourably placed for the year. This should attract foreign flows into the country. There could be some volatility in the flows on a month-on-month basis due to short-term news flows.”

According to data from depositories, foreign portfolio investors (FPIs) have made a net inflow of Rs 33,688 crore in equities this month. This positive trend follows an inflow of Rs 26,565 crore in June, driven by political stability and a sharp rebound in markets.

Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, highlighted the strong economic fundamentals of India and the better-than-expected earnings season as factors that could boost investor confidence. Additionally, the anticipation of an interest rate cut by the US Federal Reserve in September and upward revisions in India’s GDP forecast by international organizations are seen as positive developments for the Indian market.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted the growing influence of domestic investors in the market, particularly in mutual funds. He pointed out that whenever FPIs were selling, domestic institutional investors (DIIs) were buying, indicating a strong presence of domestic investors in the market.

In addition to equities, FPIs also invested Rs 19,223 crore in the debt market during the period under review, bringing the total investment in debt to Rs 87,847 crore this year. With the inclusion in international bond indices, foreign flows are expected to enter the Indian bond market, potentially pushing G-Sec yields lower.

Overall, despite some short-term volatility, the Indian market remains attractive to foreign investors, and the strong economic fundamentals and policy reforms are expected to drive continued investment in the coming months.