New Delhi: Foreign portfolio investors (FPIs) are showing renewed interest in Indian equities, and analysts expect the buying trend to continue, supported by improving economic growth, a recovery in corporate earnings and relative stability in the rupee.
FPIs have invested a total of Rs 23,543 crore in the Indian market so far in August, up to August 22. Of this, Rs 14,117 crore came through stock exchanges, while another Rs 9,426 crore was invested through the primary market and other channels.
Market experts believe several factors are encouraging foreign investors to return to Indian equities. These include signs of a revival in corporate earnings in the first quarter results, a shift away from the so-called ‘chip trade’, stability in the rupee and attractive growth opportunities among companies beyond the large-cap segment.
“An important trend in the market is that FPIs are not buying leading large banking or IT stocks despite their attractive valuations. Instead, they are selectively buying mid-caps, even though valuations in this segment remain elevated,” said Dr V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd.
The selective buying suggests that foreign investors are increasingly looking for companies with stronger growth potential rather than simply focusing on the traditional large-cap sectors.
However, analysts cautioned that the global environment continues to pose challenges. High US bond yields remain a major headwind for equities as they can make fixed-income investments more attractive and put pressure on flows towards emerging markets such as India.
Indian equity markets ended the week on a cautious note as investors remained concerned about elevated crude oil prices, rising global bond yields and continuing geopolitical uncertainties. Although benchmark indices staged a recovery during the week, they ended Friday largely flat, extending the recent corrective phase.
According to Ajit Mishra, Senior Vice President, Research, Religare Broking Ltd, investors are closely watching the US Federal Reserve’s policy outlook. The Jackson Hole symposium is expected to remain an important event for global markets, with investors looking for signals on the future direction of US monetary policy.
Domestic markets also witnessed mixed sectoral performance. Realty, metal and banking stocks performed relatively well as sentiment improved towards these segments, while investors continued to favour select stocks rather than taking broad-based positions.
IT stocks remained under pressure and declined around 2.6 per cent during the week. Concerns over US inflation, elevated bond yields and uncertainty surrounding global technology spending weighed on the sector. FMCG and energy stocks also remained subdued.
Going ahead, market participants are likely to closely track crude oil prices, movements in the rupee, foreign investor flows and domestic liquidity conditions. Analysts believe that if India’s economic and earnings momentum remains strong, it could provide continued support to foreign investment flows despite the broader global risks.
With inputs from IANS