FPIs inject ₹27,856 crore in equities in September so far on U.S. rate cut expectations

FPIs invest ₹27,856 crore in Indian equities due to U.S. rate cut optimism and market resilience.

Foreign Portfolio Investors (FPIs) have infused ₹27,856 crore in domestic equities in the first fortnight this month, owing to the resilience of the Indian market and growing optimism around the potential interest rate cut in the U.S.

FPIs have been consistently buying equities since June. Before that, they pulled out ₹34,252 crore in April-May.

“With the focus shifting to the U.S. Federal Reserve’s decision on interest rates in its upcoming Federal Open Market Committee (FOMC) meeting next week, its outcome will likely play a pivotal role in shaping the trajectory of future FPIs investments in Indian equities,” Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said.

According to the data with the depositories, FPIs put in a net investment of ₹27,856 crore into equities this month (till September 13). With this, FPIs' investment in equities reached ₹70,737 crore so far this year.

V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services, has attributed two major reasons for FPIs' strong buying. First, there is a consensus now that the U.S. Fed will start cutting rates from this month onwards, pushing the U.S. yields down.

Recent data showing the U.S. inflation cooling for the fifth consecutive month, hitting a 43-month low of 2.5% year-on-year in August, has strengthened expectations that the U.S. Federal Reserve may proceed with a rate cut at its upcoming policy meeting. This will facilitate fund flows from the U.S. to emerging markets.

“Secondly, the Indian market is extremely resilient with strong momentum and missing out on the Indian market would be a bad strategy for FPIs,” he added. High valuations in India, however, continue to be a concern.