News

Published: December 18, 2023
Updated: December 18, 2023

Unlocking India's Economic Potential: FPIs Propel Market Resurgence

In a stunning rebound, foreign investors inject a whopping Rs 1.5 trillion into Indian equity markets in 2023, defying global uncertainties that led to the worst-ever outflow in 2022. Experts anticipate the positive trend to extend into 2024.

Optimism Amid Global Shadows:

Foreign Portfolio Investors (FPIs) shower Indian equity markets with optimism, attributing their substantial investments to the nation's resilient economic fundamentals amidst a challenging global landscape.

Political Stability and Economic Growth on the Horizon:

As general elections loom, FPIs eye political stability and economic growth as pivotal factors. Global cues on inflation and interest rates will dictate the foreign investment flow into Indian equities, shaping 2024's investment landscape.

India's Allure for Foreign Investments:

With a promising economic growth outlook, India continues to attract foreign investment, with FPIs injecting a net of around Rs 1.5 trillion in the equity markets and Rs 60,000 crore in the debt market.

December Surge: BJP's Electoral Triumph Boosts Confidence

Enhanced political stability following BJP's success in recent state elections sparks a December surge, with close to Rs 43,000 crore invested in the first two weeks. If this trend persists, 2023 could be the best year for FPI flow.

Factors Driving 2022 Flows and Current Resurgence:

In 2022, foreign investment flows were influenced by factors like inflation, interest rates, currency movements, crude oil prices, geopolitical scenarios, and domestic economic health. The current surge stems from India's resilient fundamentals, policy reforms, corporate earnings outlook, and global liquidity trends.

India's Position as a Top Investment Destination:

International experts recognize India as a top FPI destination, citing sustained growth prospects for years to come. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasizes FPIs' investment to benefit from India's potential wealth creation.

Debt Market Comeback: A Noteworthy Shift

After three years of decline, foreign investors make a comeback in the debt market, injecting around Rs 60,000 crore in 2023. The inclusion of Indian government bonds in JP Morgan's benchmark emerging market index from June 2024 is expected to attract significant funds.

Sectoral Preferences and Shifting Trends:

FPIs show preference for financial, IT, pharma, and energy sectors, capitalizing on India's strengths in technology, healthcare, and commitment to sustainable development. The year began with a negative note but witnessed a shift as FPIs turned buyers, especially in the first six months.

Navigating Market Volatility: September Setback

Market dynamics fluctuated as FPIs, initially buyers, faced a setback in September due to global economic uncertainties. Concerns about higher crude prices, inflation, and prolonged elevated interest rates prompted a cautious approach.

November Reversal and December Momentum

November witnessed a positive turn with FPIs resuming buying, marking a net investment of Rs 9,000 crore. The momentum continues in December, driven by the favourable outcome of recent elections across significant states.

Global Signals and Economic Landscape

International signals, such as the US Federal Reserve hinting at prospective rate cuts, influence FPIs' decisions, marking a departure from the prevailing high-interest rate regime.

Navigating Uncertainties with Confidence

Despite global uncertainties, India's economic resilience, coupled with favourable political developments, positions the country as a beacon for foreign investments. FPIs' renewed confidence signals a positive trajectory, underscoring India's enduring appeal in the global investment landscape.