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FPIs have heavily invested in India, buying $6 billion in shares in September 2024, marking a significant increase compared to previous years.
In an unprecedented move this year, Foreign Portfolio Investors (FPIs) have injected nearly $6 billion into India's stock market in September, establishing this month as the highest for FPI inflows in 2024. This significant investment shift comes despite previously high valuations and robust domestic liquidity.
September's investment spike is part of an ongoing trend, with FPIs actively buying in the Indian market for four consecutive months since August 2023. This buying spree marks a notable recovery, as September historically recorded outflows, including a $2.3 billion withdrawal both in 2023 and 2022.
The substantial increase in FPI investments can be linked to several factors. India's growing prominence in global indices and the visibility of corporate earnings have played pivotal roles. Furthermore, the market has been buoyed by significant Initial Public Offerings (IPOs), including notable entries from companies such as Bajaj Housing Finance and Baazar Style Retail. Upcoming large issues, such as those from Hyundai Motors India and Swiggy, also promise to keep the momentum going.
India has not been the only emerging market to attract FPIs, though it leads with the highest inflow in September. Indonesia followed with an investment of $1.6 billion, while the Philippines and Thailand also saw considerable inflows of $345 million and $897 million, respectively.
The Indian market's appeal has been somewhat tempered by its high valuation compared to its peers. The Nifty50 index is trading at 21.5 times its one-year forward earnings, significantly higher than China's 12.4 and the Philippines' 11.5. In contrast, South Korea's Kospi trades at just 8.5 times forward earnings, highlighting the premium pricing of Indian stocks.
While India enjoys inflows, other regions have not fared as well. South Korea experienced the most substantial outflow of $5.7 billion in September, with Taiwan also seeing significant withdrawals of $2.3 billion.
The recent trend of FPI investments in India underscores the growing confidence of international investors in the Indian equity market, despite some underlying challenges such as high valuation. This scenario suggests a robust outlook for India’s financial markets as it continues to attract foreign investments at an impressive rate.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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