FPIs attract Indian equities in September amid Fed rate cut hopes

Foreign portfolio investors (FPIs) returned to the Indian equity market with a bang in September on the news that the US Federal Reserve will soon start cutting interest rates, triggering more fund flows to emerging markets.

NSDL data showed that during the current month to September 17, FPIs pumped a net $3,682 million (Rs 30,908.1 crore) into Indian equities, higher than the net monthly inflows in six of the previous eight months in the current calendar year.

Further, on September 13, FPIs invested $949 million, the second-highest single-day net investment in the domestic equity market in 2024 after $1,731 million on August 30.

Buoyed buying by FPIs in September has turned their net secondary market equity inflows in 2024 to $1,450 million so far from an outflow of $1,417 million at the end of August. At the current pace, September is likely to surpass the current year’s highest monthly net investment of $4,241 seen in March, although much will depend on the Fed’s stance on Wednesday.

Further, FPIs increased net investment in the secondary market in September unlike the previous months where they were more focused on the primary market including IPOs and Qualified Institutional Buying (QIB).

So far in September, they have invested $2,867 million in the secondary market and $815 million in the primary market. Till August in 2024, FPIs have shown more interest in the country’s primary market issues, investing $6,580.8 million as net sellers of equity worth $1,417 million in the secondary market.

“A notable trend in the market for the week ended September 13 is that FIIs were buyers of equities in the cash market on all days of the week,” VK Vijayakumar, chief investment strategist at Geojit Financial Services, said in a note. The Indian market and the possibility of a rate cut in the US were the main reasons for the enthusiastic activity of foreign investors.

In contrast to the enthusiasm shown by FPIs, domestic funds seem to have slowed down in September. According to Sebi data, net investment in equities by domestic funds till September 11 stood at Rs. 8,951 crore as compared to Rs. 17,570 crores.