Foreign Investment in India: Equities and Debt
In August, foreign investors continued to pump money into Indian equities, but at a significantly reduced pace compared to previous months. Depository data indicates that foreign investors invested Rs 7,320 crore in Indian stocks during the month. Simultaneously, investments in the debt market totaled Rs 17,960 crore.
This cautious approach is attributed to the high valuation of Indian stocks and the unwinding of the Yen carry trade due to recent interest rate hikes by the Bank of Japan.
According to Vipul Bhowar, Director Listed Investments at Waterfield Advisors, FPI flows in September will be influenced by domestic political stability, economic indicators, global interest rate movements, market valuations, and the attractiveness of the debt market.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explains that the lack of FPI interest stems from the high valuation of the Indian market. He notes that India currently offers the most expensive investment opportunities globally, making other markets more attractive to FPIs.
Bhowar also mentions the concern about a possible recession in the US and disappointing economic data. Investors have been reducing their exposure to the secondary market, where valuations are perceived to be higher, and instead allocating funds to the primary market, which offers lower returns.
