After heavy selling in October and November, foreign investors (FPIs) have once again returned to the Indian stock market. In the first two weeks of December, FPI has invested a net amount of Rs 22,766 crore in Indian markets. This investment is inspired by the expectation of interest rate cuts by the US Federal Reserve and the policies of the Reserve Bank of India (RBI).
October withdrawal
In the last months, huge volatility was seen in investment from FPI. In October, foreign investors withdrew a record Rs 94,017 crore from the Indian stock market, which was the largest figure this year. After this, further selling of Rs 21,612 crore took place in November. Earlier in September, FPI investment had reached a nine-month high of Rs 57,724 crore. This volatility was a result of uncertainty regarding global economic conditions and US interest rates.
Return of investment in December
According to depository data, till December 13, FPIs have invested Rs 22,766 crore in the Indian stock market. The announcement of possible cut in interest rates by the US Federal Reserve and reduction in the Cash Reserve Ratio (CRR) of the Reserve Bank of India has again won the confidence of foreign investors.
Role of inflation and policy decisions
Investor sentiment in the Indian market was also affected by the decline in Consumer Price Index (CPI) based inflation. Inflation was 6.21% in October, which came down to 5.48% in November. This improvement has raised hopes that RBI will cut the repo rate in its upcoming monetary policy review.
bangle of china
In recent months, a trend was seen by foreign investors to withdraw money from the Indian market and invest in China. However, in December, foreign investors have given priority to the Indian market. In fact, the steps taken by RBI to increase liquidity and better inflation rate figures have become the center of attraction for investors in the Indian market.
further prospects
Speaking to PTI, Himanshu Srivastava of Morning Star Investment Research says that the attitude of foreign investors will depend on the upcoming global and domestic economic indicators. Apart from this, inflation rate, interest rate cuts and third quarter results will influence investors’ decisions. Along with this, the current recovery of the market seems to be strengthening the confidence of foreign investors in the Indian stock market.
Let us tell you, so far this year, FPIs have made a total net investment of Rs 7,747 crore in the Indian stock market. This flow shows that the stability and growth prospects of the Indian economy are attracting foreign investors.
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