Foreign investors infused Rs 11,366 crore in the Indian debt market so far this month, pushing the net inflow in the debt segment to over the Rs 1-lakh-crore mark.
The strong buying appetite of foreign investors in the Indian debt market can be attributed to India’s inclusion in JP Morgan’s Emerging Market government bond indices in June this year.
According to data from the depositories, Foreign Portfolio Investors (FPIs) injected Rs 11,366 crore in the debt market this month (till August 24). This inflow came following a net investment of Rs 22,363 crore into the Indian debt market in July, Rs 14,955 crore in June and Rs 8,760 crore in May.
Market analysts said that ever since the announcement of India’s inclusion came in October 2023 year, FPIs have been front-loading their investments in Indian debt markets in anticipation of the inclusion in global bond indices.
Even after the inclusion, their inflows have continued to remain robust.
On the other hand, FPIs pulled out over Rs 16,305 crore from equities so far this month, due to unwinding of the yen carry trade, recession fears in the US and ongoing geopolitical conflicts.
Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said the post-budget announcement of an increase in capital gains tax on equity investments has largely fuelled this selling spree.
Overall, India remains in a favourable position, attracting long-term investments from FPIs.
“Amid a global slowdown, geo-political crisis in the middle east and neighbouring countries, India still stands at a sweet spot compelling the foreign fraternity to take a bet for a long-term investment horizon,” Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services, BDO India, said.
In terms of sectors, FPIs were big sellers in financials in India in the first fortnight of August.
Vipul Bhowar, Director Listed Investments, Waterfield Advisors, said that FPIs are selling banking shares due to concerns over slow deposit growth.
Selling was also witnessed in many other sectors, including metals on fears that economic slowdown in US and China will keep metal prices soft, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
Conversely, foreign investors were buyers in telecom and health care where the growth and earnings prospects are safe and bright, he added.
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