FPIs inject ₹27,856 crore in equities in September so far on U.S. rate cut expectations

Foreign Portfolio Investors (FPIs) have infused ₹27,856 crore in domestic equities in the first fortnight this month, owing to the resilience of the Indian market and growing optimism around the potential interest rate cut in the U.S.

FPIs have been consistently buying equities since June. Before that, they pulled out ₹34,252 crore in April-May.

“With the focus shifting to the U.S. Federal Reserve’s decision on interest rates in its upcoming Federal Open Market Committee (FOMC) meeting next week, its outcome will likely play a pivotal role in shaping the trajectory of future FPIs investments in Indian equities,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said.

According to the data with the depositories, FPIs put in a net investment of ₹27,856 crore into equities this month (till September 13). With this, FPIs’ investment in equities reached ₹70,737 crore so far this year.

V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services, has attributed two major reasons for FPIs’ strong buying. First, there is a consensus now that the U.S. Fed will start cutting rates from this month onwards, pushing the U.S. yields down.

Recent data showing the U.S. inflation cooling for the fifth consecutive month, hitting a 43-month low of 2.5% year-on-year in August, has strengthened expectations that the U.S. Federal Reserve may proceed with a rate cut at its upcoming policy meeting. This will facilitate fund flows from the U.S. to emerging markets.

“Secondly, the Indian market is extremely resilient with strong momentum and missing out on the Indian market would be a bad strategy for FPIs,” he added. High valuations in India, however, continue to be a concern.

“The robust inflows are due to underlying factors such as global confidence in India’s economic outlook and the government’s commitment to drive a long-term growth story. FPIs are encashing at the right time to tab the Indian market amidst positive market sentiments, political stability, contributing to the rally,” Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India, said.

Also, a series of regulatory reforms aimed at streamlining the process for FPI investments has further uplifted investor sentiment.

Apart from equities, FPIs invested ₹7,525 crore in debt through the voluntary retention route in the first two weeks of September and ₹14,805 crore in government debt securities designated under the Fully Accessible Route (FAR).