FPIs showed strong interest in the Indian market, reflecting its resilience amid global uncertainties.
The latest US jobs data suggests the US economy is slowing which in turn has raised expectations for a rate cut by the Fed in September, perhaps even 50 bp. The resulting fall in the US 10-year bond yield to 3.73% is positive for FPI flows to emerging markets like India,” said Dr. Geojit Financial Services, Chief Investment Strategist. VK Vijayakumar said.
However, Vijayakumar cautions that elevated valuations are still a concern. If US growth concerns affect global equity markets in the coming days, FPIs are likely to use the opportunity to buy in India.
FPI flows are affected by various factors beyond the inclusion of bonds. Key factors affecting investment decisions include geopolitical developments, the health of the US economy, yen borrowing and prevailing risk-hedging strategies.
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“Global market sentiment has turned particularly cautious, as Nvidia’s 25% decline after reaching a record high in June. Concerns over a possible US slowdown and China’s ongoing economic challenges are critical considerations for investors to reassess their allocations,” believes Sunil Damania, Chief Investment Officer, MojoPMS.
If the risk-off strategy continues, emerging markets may experience a slowdown in FPI inflows, Damania added.
FPI is seen as critical as it increases market liquidity and provides essential capital inflows, which support economic growth and stability. Furthermore, it contributes to market efficiency and reflects international confidence in a country’s financial system.
(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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