Foreign Portfolio Investors Bring Big Bucks to India in 2024
New Delhi [India], August 22, 2024: Foreign Portfolio Investors (FPIs) became net buyers in the Indian financial markets, with net inflows of USD 10.8 billion in June and July 2024, according to the monthly economic review by the Department of Economic Affairs under the Ministry of Finance.
The review report released on Thursday highlighted that the trend in the equity component also reversed, with a net equity FPI of USD 7.1 billion. According to NSDL data, the sectors that drew the largest FPI equity inflows from April to July 2024 were capital goods, telecommunications, and consumer services.
The debt segment is still attracting FPI inflows and is projected to generate around USD 20-40 billion in 18-21 months after Indian Government Bonds are included in JP Morgan’s Emerging Markets global bond index, listed on June 28, 2024. Due to India’s participation in other global indices, there is a favorable prognosis for debt investments made by Foreign Portfolio Investors.
The report also noted that Foreign Direct Investment (FDI) flows picked up in FY25, with net FDI inflows increasing by 42.7% during the Q1 of FY25. Gross FDI inflows rose from USD 17.8 billion during April-June 2024 to USD 22.5 billion in the first three months of FY25.
India’s External commercial borrowings moderated to USD 1.8 billion during April-June of FY25 compared to an inflow of USD 5.7 billion a year ago. Non-resident deposits recorded higher net inflows of USD 2.7 billion during April-May of FY25 compared to USD 0.6 billion in the previous year.
Supported by robust capital inflows, India’s foreign exchange reserves reached a historical high of USD 675 billion as of August 2, 2024, sufficient to cover 11.6 months of imports and 101.7% of external debt as of March 2024. The report added that India’s external sector is expected to remain resilient, as can be gauged from the performance of key external sector stability indicators.
Doubts Revealed
Foreign Portfolio Investors (FPIs) -: FPIs are people or companies from other countries who invest money in India’s stocks, bonds, or other financial assets.
Net buyers -: Net buyers means that these investors bought more financial assets than they sold, bringing more money into the market.
USD 10.8 billion -: This is a large amount of money, specifically 10.8 billion US dollars, which is a lot more than Indian rupees.
Equity component -: This refers to the part of the investment that is put into stocks or shares of companies.
Capital goods -: These are large items like machinery and equipment that companies use to produce other goods.
Telecommunications -: This sector includes companies that provide phone and internet services.
Consumer services -: These are services provided directly to people, like retail stores, restaurants, and entertainment.
Global bond indices -: These are lists of bonds from around the world that investors use to decide where to put their money.
Debt investments -: This means lending money to companies or governments in exchange for interest payments.
Foreign direct investment (FDI) -: FDI is when people or companies from other countries invest directly in businesses or factories in India.
Q1 of FY25 -: This means the first quarter (April to June) of the financial year 2025.
Foreign exchange reserves -: These are assets held by the central bank of India in foreign currencies, which help stabilize the country’s economy.
USD 675 billion -: This is a very large amount of money, specifically 675 billion US dollars, which is a lot more than Indian rupees.