Foreign investors maintained their inflow in equities in August, however, the value of investment stood way lower in comparison to earlier months. Official data from the depository revealed that investors poured in Rs 7,320 crore in Indian equities in the month, while the infusion in the Indian debt market stood at Rs 17,960 crore.
The investment from foreign portfolio investors (FPIs) in equities in July touched Rs 32,365 crore and Rs 26,565 crore in June, reported PTI. The cautious stance adopted by the investors in August can be attributed to the high valuation of stocks and the unwinding of the Yen carry trade following the hike in interest rates by the Bank of Japan.
Elaborating on the outlook for investors’ approach, Vipul Bhowar, Director Listed Investments, Waterfield Advisors, said, “While September is likely to see continued interest from FPIs, the flows would be shaped by a combination of domestic political stability, economic indicators, global interest rate movements, market valuations, sectoral preferences, and the attractiveness of the debt market.”
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, explained that the high valuation in the Indian market has resulted in the lack of interest exhibited by the FPIs. The analyst said, “With Nifty trading at above 20 times estimated FY25 earnings, India is the most expensive market in the world now. FPIs have opportunities to invest in much cheaper markets and, therefore, their priority is markets other than India.”
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Bhowar added that concerns of a possible recession in the US and economic data faring below expectations escalated the reaction from the investors. Notably, the investors have been offloading in the secondary market where valuations are assumed to be higher, and pouring in funds towards the primary market, which yields relatively lower returns.