Foreign Portfolio Investors turn net buyers, with debt segment still attracting FPI inflows
Aug 22, 2024
New Delhi [India], August 22 : Following outflows in the first two months of Financial Year (FY) 25, 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 published by the Department of Economic Affairs under the Ministry of Finance.
The review report released on Thursday said 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. As per the report, debt segment is still attracting FPI inflows.
It 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, as per the report.
Due to India's participation in other global indices, there is a favourable prognosis for debt investments made by Foreign Portfolio Investors, the report added.
"There's a positive outlook for investments from FPIs in debt due to India's inclusion in other global indices," the monthly economic review added.
As per the monthly report, the Foreign direct investment (FDI) flows picked up in FY25 as net FDI inflows increased by 42.7 per cent during the Q1 of FY25.
The increase in net FDI inflows is largely due to a rise in gross FDI inflows, as per the report.
Gross FDI inflows increased 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, the report observed.
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, the report added.
Supported by robust capital inflows, India's foreign exchange reserves reached a historical high of USD 675 billion as of 2 August 2024, sufficient to cover 11.6 months of imports and 101.7 per cent 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.
