FPIs turn net sellers

New Delhi: Foreign institutional investors (FIIs) infused Rs32,365 crore into Indian equities in July on the back of expectation of continued policy reforms and sustained economic growth and better-than-expected earnings season. However, they pulled Rs1,027 crore from equities in the first two trading sessions of this month (August 1-2), data with the depositories showed. There has been a mixed trend with respect to FPI flows following the budget announcement on increase in capital gains tax on equity investments. Going forward, developments in the US economy and markets will set the trend for FPI in August, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

“Weaker-than-expected employment data along with slowing economy has made it certain that the US Fed is expected to cut rates in September. The more important question here is the extent of cut. Currently, there is strong commentary getting built for maybe a 50 basis points rate cut in interest rates,” said Vaibhav Porwal, co-founder of Dezerv.

According to the data with the depositories, Foreign Portfolio Investors (FPIs) have made a net inflow of Rs32,365 crore in equities in July. This came following an inflow Rs26,565 crore in June driven by political stability and the sharp rebound in markets. Before that, FPIs withdrew Rs25,586 crore in May on poll jitters and over Rs8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields. The resurgence in FPI investment can be attributed to sustained economic growth, government’s focus on infrastructure development, better-than- expected earnings season that has improved corporate India’s balance sheet, Himanshu Srivastava, Associate Director - Manager Research at Morningstar Investment Research India.

Additionally, upward revisions in India’s GDP forecast by IMF and ADB, and a slowdown in China, also works in India’s favour, he added. Apart from equities, FPIs invested Rs22,363 crore in the debt market in July. This has pushed the debt tally to Rs94,628 crore this year so far.