Data from the National Securities Depository of India (NSDL) showed that foreign portfolio investors invested Rs 51,204 crore in Indian equities in August, the highest in 20 months. Meanwhile, FPIs were net buyers of Indian equities for the second month in a row through August, helping the domestic index remain buoyant.
They were net buyers in July with a total purchase of shares worth Rs 4,989 crore, NSDL data showed. September 2021 was the last time foreign investors were net buyers. Data from depositaries shows they have invested Rs 1,963 crore so far this month – September.
Recent returns on foreign investment, coupled with what appears to be a flattening of global inflation, have helped Indian stocks rebound over the past month or so. The recent surge in stock indexes has helped wipe out overall losses for investors in 2022.
Headline retail inflation in India fell to 6.71% in July from 7.01% in June, the lowest level in five months. In the U.S., retail inflation also moderated, improving investor sentiment.
When it comes to FPI investments in India, they sold shares in the Indian market for 9 to 10 months until early July for various macro reasons.
Monetary tightening in advanced economies, including rising demand for U.S. dollar-denominated commodities, as well as a stronger U.S. dollar, have prompted continued outflows from Indian markets. During times of high market uncertainty, investors generally prefer stable markets.
In addition, the continued depreciation of the rupee and the depletion of India’s foreign exchange reserves also weighed on the weak market sentiment. FPIs have withdrawn a total of Rs 159,202 in shares so far in 2022, NSDL data shows.