Foreign portfolio investors (FPI) put in Rs 14,866 crore in Indian markets in the first half of January with participants expecting strong third-quarter results by companies.
As per depositories data, FPIs invested a net Rs 18,490 crore into equities but pulled out Rs 3,624 crore from debt segment between January 1-15.
This translated into a total net investment of Rs 14,866 crore during the period under review.
The strong flows are on account of the positive bias towards emerging markets and because of strong third-quarter earnings thus far besides decreasing domestic COVID-19 cases, said Rusmik Oza, executive vice president, head of fundamental research at Kotak Securities.
The forthcoming US stimulus could be another trigger for positive FPI bias towards emerging markets and India, he added.
"The earnings season is expected to be very strong going forward which along with budget expectations could keep sentiment alive and FPI flows also positive," Oza said.
Giving an overview of emerging markets, Oza said that the "start of calendar year has been mixed for emerging markets".
Countries apart from India that are witnessing positive FPI flows are Taiwan, Thailand, Brazil and South Africa, while favourites of FPIs like South Korea, Indonesia, Vietnam and Philippines have seen outflows since the start of this year, he noted.
Harsh Jain, co-founder and COO at Groww, said that earlier, investors were putting money in a few select bluechip stocks but as their valuations climbed, more investors are now looking towards smaller companies and even outside the large-cap category to invest in.
Going forward, focus of FPIs on domestic front would continue to be on the active COVID case count coming further down and the economy getting back on growth trajectory, said Himanshu Srivastava, associate director - manager research, Morningstar India.
There has been improvement in the macro economic environment which has so far ensured that FPI flows remain intact, he added.
He further said that worries about rising COVID infections in several parts of Europe and US could play spoil sport as this could lead to investors turning risk averse if the situation deteriorates.
"However, the continuation of accommodative stance by global central banks may ensure flow of foreign investments into emerging markets, including India," Srivastava said.