FPI Net Investments Drop Amid Budget Uncertainty

Net investments by Foreign Portfolio Investors (FPIs) in the Indian equity market dropped to Rs 2,916 crore for the week ending July 26. The decline comes amid investor selling and budget uncertainty, according to data from the National Securities Depository Limited.

Last week, foreign investors injected Rs 15,420 crore into the Indian market, but their buying activity significantly reduced from July 22 to July 26. So far in July, net FPI investments in the equity market total Rs 33,688 crore, bringing their annual total to Rs 1,39,010 crores.

“The Budget 2024-25 has not sparked significant excitement,” said Vinod Nair, Head of Research at Geojit Financial Services. “The increase in capital gains taxes added to market volatility. Although the government’s fiscal discipline and growth focus are appealing, high valuations and muted Q1FY25 earnings expectations have led to caution among FPIs.”

Domestic Institutional Investors (DIIs) employ a ‘buy on dips’ strategy, driving market gains in sectors like pharma, auto, metal, IT, and FMCG. FPI flow volatility affects other global markets too, with inflows noted in Brazil, Indonesia, Malaysia, Philippines, and South Korea, while Taiwan, Thailand, and Vietnam saw outflows.

“Market focus has quickly shifted from the Union Budget to the Q1FY25 earnings season,” said Shrikant Chouhan, Head of Equity Research at Kotak Securities. Despite being net sellers in January, April, and May, FPIs turned into net buyers in February, March, and June, marking an erratic trend in foreign investment this year.

(With inputs from agencies.)