Foreign Investors’ Interest in Indian Market Declines Amid Budget Uncertainty
Foreign Portfolio Investors (FPIs) reduced their net investments in the Indian equity market to Rs 2,916 crore for the week ending July 26, due to budget-related uncertainties. Despite injecting Rs 15,420 crore the previous week, FPIs’ buying slowed significantly. The total FPI investment for July stands at Rs 33,688 crore, with this year’s total reaching Rs 1,39,010 crore.
Vinod Nair, Head of Research at Geojit Financial Services, explained, “The Budget 2024-25 has not sparked any significant excitement in the market, while it was both populist and prudent. The increase in short- and long-term capital gains taxes added to the volatility on budget day. Although the government’s emphasis on fiscal discipline and growth is appealing, FIIs are cautious due to current high valuations and muted expectations for Q1FY25 results.”
Meanwhile, Domestic Institutional Investors (DIIs) continue to employ a ‘buy on dips’ strategy, contributing to market gains in sectors like pharma, auto, metal, IT, and FMCG.
FPI flows have been volatile not just in India but globally. Countries like Brazil, Indonesia, Malaysia, Philippines, and South Korea saw FPI inflows, while Taiwan, Thailand, and Vietnam experienced outflows.
Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted, “Market focus has swiftly moved on from the Union Budget to the ongoing Q1FY25 earnings season. The FY2025 Union Budget delivered a judicious balance between capital expenditure, fiscal prudence, and welfarism. FPI flows are expected to remain volatile.”
This year’s trend in foreign investment has been erratic. Foreign investors were net sellers in January, April, and May, cumulatively selling equities worth around Rs 60,000 crore. However, they turned into net buyers in February, March, and June, with cumulative purchases amounting to Rs 63,200 crore.
Doubts Revealed
Foreign Investors -: Foreign investors are people or companies from other countries who put their money into businesses or markets in India to make a profit.
Indian Market -: The Indian market refers to the place where people buy and sell shares of companies in India, like the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE).
Budget Uncertainty -: Budget uncertainty means that people are unsure about the government’s financial plans, like how much money it will spend and where it will get the money from.
Foreign Portfolio Investors (FPIs) -: FPIs are investors from other countries who buy stocks, bonds, or other financial assets in India, but they do not control the companies they invest in.
Net Investments -: Net investments are the total amount of money invested after subtracting the money taken out. If FPIs put in Rs 5,000 crore and take out Rs 2,000 crore, the net investment is Rs 3,000 crore.
Equity Market -: The equity market is where shares of companies are bought and sold. When you buy a share, you own a small part of that company.
Rs 2,916 crore -: Rs 2,916 crore is a large amount of money. One crore is equal to 10 million, so Rs 2,916 crore is 2,916 times 10 million rupees.
Injecting Rs 15,420 crore -: Injecting Rs 15,420 crore means that FPIs put this amount of money into the Indian market the previous week.
High Valuations -: High valuations mean that the prices of shares are very high compared to the company’s earnings or profits, making them expensive to buy.
Muted Q1FY25 Expectations -: Muted Q1FY25 expectations mean that experts think the profits of companies for the first quarter of the financial year 2025 will not be very high.
