Foreign Investors Return as Strong Economy and Stable Rupee Boost Confidence in India

New Delhi: Foreign portfolio investors (FPIs) are showing renewed confidence in India, supported by stronger economic fundamentals, a stable rupee, and government measures that have made debt investments more attractive for overseas investors, market analysts said.

After turning net buyers in early July, FPIs have continued to increase their exposure to Indian markets. Data up to July 10 shows net investments of Rs 5,155 crore in the secondary market. Along with inflows of Rs 10,001 crore through the primary market and other investment categories, total FPI investments during the period have reached Rs 15,156 crore.

Dr V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd., described the trend as an encouraging sign for the Indian market, highlighting the growing interest of foreign investors in both equity and debt instruments.

Debt investments have emerged as a key driver of foreign inflows this month. FPIs have invested Rs 3,228 crore through the General Limit route and another Rs 6,619 crore under the Fully Accessible Route (FAR), reflecting increasing confidence in India's fixed-income market.

Analysts attribute this shift to India's improving macroeconomic indicators, stable currency, and tax reforms that have enhanced the attractiveness of debt investments for foreign investors. The movement has also been aided by weakness in the global semiconductor trade and foreign investors reducing exposure in markets such as South Korea.

Market experts believe the positive trend in FPI inflows could continue, provided geopolitical tensions in West Asia do not intensify further.

Indian equity markets, however, ended last week slightly lower, ending a four-week winning streak as renewed tensions in West Asia and a sharp rise in crude oil prices weighed on investor sentiment.

The escalation followed reports that Iran targeted US military installations across Gulf countries in response to recent American strikes. The developments briefly pushed Brent crude prices above $80 per barrel before they eased to around $76 by the end of the week, reducing concerns over inflation and India's external balance.

According to Ajit Mishra, Senior Vice President (Research) at Religare Broking Ltd., geopolitical developments remained the biggest influence on market sentiment throughout the week.

Sector-wise, real estate stocks led the gains, followed by information technology and metal companies, driven by selective buying and improving investor confidence.

Looking ahead, analysts expect market direction to be shaped by upcoming macroeconomic data, quarterly corporate earnings, and further developments on the geopolitical front.

With inputs from IANS