Foreign investors bought equities worth over Rs 7,900 crore in the first week of July amid a healthy economic and earnings growth momentum. With this, the total FPI investment in Indian equities reached Rs 1.16 lakh crore so far this year, data with the depositories showed. 

Going forward, the Union Budget and Q1FY25 earnings could determine the sustainability of FPI flows, experts said. The Union Budget 2024-25 will be presented on July 23 by Finance Minister Nirmala Sitharaman. The Budget session will kick off from July 22. 

According to the data, foreign portfolio investors (FPIs) have made a net inflow of Rs 7,962 crore in equities till July 5. This came following an inflow of Rs 26,565 crore in equities in June driven by political stability and a sharp rebound in markets. 

The FPIs withdrew Rs 25,586 crore in May on poll jitters and over Rs 8,700 crore in April on concerns over a tweak in India's tax treaty with Mauritius and a sustained rise in US bond yields. 

Some funds were probably waiting on the sidelines for the election event to be over, Milind Muchhala, Executive Director, Julius Baer India, told PTI. “We believe that India remains an attractive investment destination amid a healthy economic and earnings growth momentum, and the FPIs cannot afford to ignore the markets for too long,” he added. 

Geojit Financial Services Chief Investment Strategist VK Vijayakumar said a significant feature of FPI flows is that their selling in India has been triggered by external factors like rising bond yields in the US and low valuations in other emerging markets, PTI reported. When that situation changes, they again become buyers in India, he added. 

In the fortnight ended June 30, foreign investors bought heavily in telecom and financial services. Additionally, they were buyers in autos, capital goods, healthcare and IT. On the other hand, selling was seen in metals, mining and power, which had run up too fast in recent months. 

The debt market also caught attention of FPIs where they invested Rs 6,304 crore during the period under review taking the total debt tally to Rs 74,928 crore this year so far. 

“The inclusion of Indian government bonds in the JP Morgan EM Govt Bond Index and the front running by investors have contributed to this divergence in equity and debt inflows,” Vijayakumar said. 

India is poised to receive billions of dollars in investments as JPMorgan Chase & Co included Indian government bonds in its emerging markets index past month. This opens up a $1.3 trillion market to a broader range of global investors. 

Since JPMorgan’s announcement in September, nearly $11 billion has already flowed into eligible bonds. The bank anticipates an additional $20-25 billion in the next ten months, potentially increasing foreign ownership of Indian bonds from 2.5 percent to 4.4 percent.