Foreign Investment in Indian Equities Plummet in August

Net foreign investment in India's equity market fell to Rs 7,320 crore in August, the lowest in three months. Despite a record one-day investment at month-end, the overall trend shows declining interest due to high market valuations, with FPIs focusing on more affordable markets.

The net foreign investment in August in the Indian equity market declined to Rs 7,320 crore, marking the lowest monthly investment in the past three months. This drop stands in sharp contrast to July, during which foreign portfolio investors (FPIs) invested Rs 32,365 crore, according to data from the National Securities Depository Limited (NSDL).

According to the NSDL data, throughout August, foreign investors were predominantly net sellers in the Indian equity market. However, a notable shift occurred on Friday, August 30, when FPIs recorded a net investment of Rs 14,518.14 crore in a single day, making the overall monthly investment positive. The data also indicated that foreign investors during the last week of August (August 26 to 30) made a record net investment in the equity market totaling Rs 23,585.92 crore, which turned the overall investment in the month positive.

'FPI investment in equity is steadily coming down recently with net investment of only Rs 7,320 crores in August compared to Rs 32,365 crores in July. The fundamental reason for the poor FPI interest is the high valuation in the Indian market. With Nifty now trading at above 20 times estimated FY25 earnings, India is the most expensive market in the world now,' said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. Experts pointed out that FPIs have opportunities to invest in much cheaper markets and prioritize markets other than India. Most FPIs buying happens through the 'primary market and others' category. In the cash market, they have been consistent sellers because of elevated valuations.

'Valuations in the Indian equity market have risen to relatively high levels, leading FIIs to exercise caution when investing in India. They have been selectively investing in defensive market segments, focusing on sectors such as healthcare and FMCG. On the debt market front, the strong buying trend among FIIs can be traced back to India's addition to JP Morgan's Emerging Market government bond indices earlier this June,' said Vaibhav Porwal, Co-founder, Dezerv. FPIs, which involve investors acquiring foreign financial assets, play a significant role in influencing market dynamics by channeling substantial funds into the Indian equity market. (ANI)

(With inputs from agencies.)