September has turned out to be the best month in the current calendar year in terms of foreign flows as foreign portfolio investors (FPIs) have bought shares worth nearly $7 billion – the highest quantum of net buying since December 2023.
Data from NSDL shows that the net buying by FPIs in September is pegged at nearly $6.85 billion, a significant jump from last month’s $873 million. This is also the highest monthly buying since December last year when FPIs were net buyers at $7.9 billion.
Meanwhile, the current calendar year has seen FPIs being net buyers of Indian equities at a little over $12 billion.
Also read: Nearly $10 bn invested by FPIs in debt in FY25 so far, shows data
Analysts attribute this trend primarily to the dovish commentary by the US Federal Reserve with the rate cut finally announced on September 18.
“The September 18th rate cut and the dovish commentary by the Fed can be seen as a major pivot in interest rates, facilitating sustained flows to emerging markets like India,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
However, he also pointed out a significant trend of large inflows into the Hong Kong market, which outperformed with a 14 percent gain in September.
"The monetary and fiscal stimulus being implemented by China is expected to stimulate the Chinese economy and the stocks listed in the Hong Kong market. If the outperformance of the Hang Seng continues, it is possible that more funds will flow to Hong Kong, given that its market’s current valuation is very attractive," he said.
Incidentally, FPIs have been betting big on Indian debt as well with the total investments in September pegged at $3.75 billion, bringing the overall debt investment for 2024 to $17.09 billion.
Total investments across all categories -- debt, equity, alternative investment funds (AIF), mutual funds (MF), and hybrid funds -- have reached approximately $30.66 billion in the current calendar year till September – higher than last year’s $28.70 billion.
Krishna Appala, Senior Research Analyst at Capitalmind Research believes that FPIs have shown a growing interest in Indian debt, with inflows being driven by the inclusion of Indian bonds in JPMorgan’s index.
“With large-cap valuations remaining attractive and FIIs returning in force, the outlook for the market remains positive," he said.
Foreign portfolio investment (FPI) flows to emerging markets in 2024 have shown mixed trends, according to Shrikant Chouhan, Head of Equity Research at Kotak Securities.
Brazil experienced marginal outflows of $0.02 billion, while South Korea saw significant outflows of $5.09 billion, followed by Taiwan with $2.15 billion and Vietnam with $0.08 billion in outflows.
In contrast, India attracted inflows of $5.72 billion, Indonesia received $1.81 billion, Malaysia saw $0.20 billion, the Philippines recorded $0.34 billion, and Thailand attracted $0.95 billion in inflows.
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