MUMBAI: Foreign investors who rediscovered their appetite for Indian debt in June have now widened their interest to equities as well in July. After months of persistent selling, foreign portfolio investors (FPIs) have turned net buyers in July, investing $2.59 billion (Rs 24,662 crore) in the first 10 days of the month.The reversal, triggered by a steady rupee and a shift in investment trend from semiconductors, marks a sharp change in sentiment from earlier this year, when concerns over valuations, global uncertainty and shifting capital flows prompted sustained withdrawals.Unlike June, when foreign inflows were driven largely by debt after the govt and RBI eased access to sovereign bonds and removed tax frictions, July has seen equities regain favour as well. Equity investments accounted for $1.6 billion, or more than 61% of total inflows, followed by investments through the fully accessible route (FAR) at $697 million and debt under the general limit at $340 million.
After $24Bn Outflows In March-May, July Sees $2.6Bn Inflows
The turnaround has been broad-based. Between March and May, FPIs withdrew more than $24 billion from Indian markets, including a record monthly outflow of $13.6 billion in March. June marked a tentative recovery with net inflows of $531 million. July has strengthened that trend. Every trading session between July 1 and July 10 recorded positive net inflows, culminating in a single-day investment of nearly $978 million on July 9.The shift has been most striking in equities. Foreign investors sold Indian shares for four consecutive months through June, including withdrawals of more than $5.1 billion in that month alone. In July, however, equities have become the largest destination for foreign capital, attracting Rs 15,157 crore (about $1.6 billion) in first 10 days of the month.Debt continues to attract investors, though with changing preferences. Inflows through the FAR and general debt route remained strong, extending the momentum from June’s surge in bond purchases.According to Suresh Ganapathy, analyst with Macquarie, a large chunk of the inflows are coming into financial services. “With Korea and Taiwan being more volatile, any flows back to India would be led by inflows into financials in my view,” he said.VK Vijayakumar, chief investment strategist at Geojit Investments, attributed the improvement to stronger economic fundamentals and a more stable currency.
