1 day ago
Foreign Investors Return to Indian Stocks After Four-Month Selloff
Foreign investors bought a lot of Indian company shares in August.
They invested $3.1 billion, which was the biggest monthly purchase since September 2024.
This was the second month in a row that they bought Indian shares.
Earlier, they had sold shares for four months and removed $27.8 billion from the market.
Investors were attracted by lower prices, better company earnings and fairly steady economic conditions.
They also moved some money away from markets focused heavily on artificial intelligence stocks.
Financial companies and automobile companies received especially strong interest.
Experts disagree about whether this is the start of a lasting trend.
Many think investors are making a short-term opportunity-based bet and that future investment will depend on oil prices, world events and taxes.
Foreign investors bought $3.1 billion of Indian equities in August, the highest monthly inflow since September 2024.
August marked the second consecutive month of foreign buying after a four-month, $27.8 billion selloff.
Reasonable valuations, stronger-than-expected April-June earnings and stable macroeconomic conditions supported the inflows.
Financial services received $685 million and automobiles $462 million from foreign investors in the first half of August.
Market experts expect foreign flows to remain volatile and say the recent buying may be opportunistic rather than structural.
- Who
- Foreign institutional investors and other foreign portfolio investors bought Indian equities.
- What
- Foreign investors recorded $3.1 billion in Indian equity inflows during August.
- Where
- India's stock market, including sectors such as financial services and automobiles.
- When
- In August, following $2.1 billion of inflows in July.
- Why
- Investors were encouraged by reasonable valuations, stronger-than-expected April-June earnings, stable macroeconomic conditions and a shift away from AI-heavy markets.
Opportunistic Revival View
Structural Recovery View
Meaning of the August inflows
Opportunistic Revival View
The buying reflects a temporary, opportunistic investment as valuations became more reasonable and the global AI rally weakened.
Structural Recovery View
The consecutive monthly inflows, improved earnings and stable policy could represent the early stages of renewed confidence in Indian equities.
Durability of foreign buying
Opportunistic Revival View
Experts cited in the article expect flows to remain volatile and dependent on oil prices, geopolitical conditions and taxation.
Structural Recovery View
A more lasting revival could develop if West Asian peace improves and oil prices fall by more than 20% from current levels.
Role of taxation
Opportunistic Revival View
Current securities transaction tax and capital gains tax create friction and reduce post-tax returns for foreign portfolio investors.
Structural Recovery View
Some market participants argue that removing or easing these taxes could make India more attractive for structural foreign investment.
Key facts
- August inflow
- $3.1 billion into Indian equities
- Previous month inflow
- $2.1 billion in July
- Earlier selloff
- $27.8 billion sold between March and June
- Financial services inflow
- $685 million during the first half of August
- Automobile inflow
- $462 million during the first half of August
- Index performance
- The Nifty 50 and Sensex rose about 1% from July, while mid- and small-cap indices gained 5-6%
- Potential risks
- Crude oil prices, geopolitical stability and taxation could affect future foreign flows
Quotes
G Chokkalingam
Founder of Equinomix Research
“It is not a structural reversal, as buying value is insignificant compared to their selling in the last 2 years…structural buying can happen if peace prevails in West Asia, and therefore, oil prices fall more than 20% from current levels.”
indianexpress.com
“In our view, capital gains tax (CGT) on FPIs in India should go, because we feel it is doing more harm than good. It has created friction, caused double taxation, and a 2.4 percentage-point CAGR hit on post-tax returns for FPIs.”
indianexpress.com
Sources
Related news
Foreign Investors Deliver India's Strongest Stock Inflow In 23 Months
FPIs Invest ₹16,621 Crore in Indian Equities in August
FPIs Resume Indian Equity Buying on Earnings and Rupee Stability
Foreign Investors Extend Indian Equity Buying Streak in August
FPIs continue buying spree, invest ₹12,921 crore in Indian equities
FIIs Turn Net Buyers After $2.5 Billion July Inflow
India Prepares Pilot for Tokenised Corporate Bonds
India’s Current Account Deficit Seen Manageable Despite Trade Widening
BSE, MCX, NSDL: Key Trading Levels, Targets and Stop-Losses
