New Delhi: Foreign investors have aggressively purchased Indian stocks after becoming net buyers last month, contributing Rs 49,250 crore so far in August as a result of improving corporate results and macroeconomic fundamentals.

Data from depositories showed that this was significantly more than the net investment made by Foreign Portfolio Investors (FPIs) in July, which was close to Rs 5,000 crore.

After nine consecutive months of significant net outflows beginning in October of last year, FPIs began to turn positive in July. They sold a huge amount of equity in the amount of Rs 2.46 lakh crore between October 2021 and June 2022.

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According to Vivek Banka, a founding member of the fintech platform GoalTeller, FPI flows will be significantly influenced by commodity prices, geopolitical tensions, business performance, and signals from the US Fed regarding interest rate movements in the upcoming months.

The ultra-hawkish posture taken by US Fed chairman Jerome Powell in Jackson Hole is detrimental to equity markets in the short run.

According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, this might have an immediate impact on FPI flows.

Data from depositories show that during the period of August 1–26, FPIs invested a net amount of Rs 49,254 crore in Indian shares. This is the largest investment they have made so far this year.

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The main drivers of cash injection by FPIs, according to Jay Prakash Gupta, founder of Dhan, are stronger corporate earnings despite increased crude oil prices and concerns about a worldwide recession.

Kotak Securities’ Shrikant Chouhan, Head of Equity Research (Retail), also attributed the increase to improved macroeconomic fundamentals for corporate earnings.

Despite the rise in US bond yields and the strengthening currency in August, foreign investors kept buying stocks. According to Vijayakumar, the fact that FPIs are investing in India despite the dollar’s strength shows that they have faith in the country’s economy.

Due to decreasing gasoline costs, US inflation decreased from a 40-year high in June to 8.5% in July.

According to Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, there are a number of reasons for the net inflows during the past few weeks. Although inflation is still high, it has recently increased less than anticipated, which has improved attitudes. This increased speculation that the US Fed would raise interest rates in a manner that was relatively less aggressive than initially predicted.

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As a result, it also somewhat reduced US recession fears, which improved attitudes and investors’ risk appetite, according to him.

On the home front, the Indian equity markets’ downturn gave investors a great purchasing opportunity, he continued.

FPIs took advantage of this chance to invest in carefully curated, premium businesses. They are now investing in financial, capital, FMCG, and telecom stocks.

Additionally, during the month under review, FPIs invested a net total of Rs 4,370 crore in the debt market.

Aside from India, positive flows were observed in Indonesia, South Korea, and Thailand during the study period, whereas negative flows were observed in the Philippines and Taiwan.

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