Foreign investors turn net buyers in India for second straight month

Till early July, foreign portfolio investors (FPIs) had been selling equities in the Indian markets for the past nine-to-ten months due to various reasons.

Tightening of monetary policy in advanced economies including rising demand for dollar-denominated commodities, and strength in the US dollar had triggered a consistent outflow of funds from Indian markets. Investors typically prefer stable markets in times of high market uncertainty.

Further, consistent depreciation of the rupee as well as depleting Indian foreign exchange reserves too had a bearing on the weak market sentiments.

India's forex reserves have been depleting for months now on account of RBI's likely intervention in the market to defend the depreciating rupee coupled with strong demand for dollars in order to settle import trade.

So far in August, they bought equities worth another Rs 51,204 crore, data showed.

For the record, FPIs have pulled out overall Rs 168,798 crore so far in 2022, NSDL data showed.

In July, they were, however, the net buyer with a total purchase of equities worth Rs 4,989 crore.

September 2021 was the last time when the foreign investors were net buyers.

The recent return of foreign investments coupled with global inflation seeming to have plateaued helped Indian equity markets to rally during the past month or so. The recent rise in stock indices helped in recovering the entire losses the investors incurred so far in 2022.

Notably, the latest consistent rally in Indian stocks has made investors richer by around Rs 27 lakh crore. The all-India market capitalization rose from Rs 25,319,892 crore on July 11 to Rs 28,032,755.91 till last updated on Tuesday, Bombay Stock Exchange data showed.

In the meantime, retail inflation in the US and India has somewhat moderated, which improved buying sentiments amongst investors.

India's headline retail inflation fell to 6.71 per cent in July from 7.01 per cent in June, the lowest level in five months, helped by an easing in food and oil prices, as per the National Statistical Office data.