FPI inflows: Foreign investors have injected more than Rs 13,300 crore into equities in the first two weeks of April, driven by confidence in the resilient domestic economy and promising growth prospects.

However, concerns loom over potential changes in the India-Mauritius tax treaty, which could impact foreign portfolio investor (FPI) inflows until details of the new treaty are clarified, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Additionally, heightened tensions between Iran and Israel in the Middle East are contributing to market uncertainty in the near term.

Despite these concerns, domestic institutional investors (DIIs) are holding significant liquidity, and retail and high-net-worth individuals (HNIs) in India remain optimistic about the market, which could help absorb any FPI selling pressure.

Data from depositories shows that FPIs have made a net investment of Rs 13,347 crore in Indian equities so far in April, with Friday witnessing FPI selling of Rs 8,027 crore on fears related to the India-Mauritius tax treaty.

Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment Research India, cited several factors contributing to the significant inflow, including Fitch's downgrade of China's sovereign credit rating outlook and anticipation of a normal monsoon season in India that could ease inflationary pressures.

Apart from equities, FPIs have invested a net amount of Rs 1,522 crore in the debt market during this period, continuing a trend seen in recent months.

FPIs have been attracted to the Indian debt markets, partly due to the upcoming inclusion of Indian government bonds in the JP Morgan Index, announced by JP Morgan Chase & Co in September last year. This inclusion is expected to attract $20–40 billion in the next 18 to 24 months.

Overall, the total inflow for the year so far stands at Rs 24,241 crore in equities and Rs 57,380 crore in the debt market.

(with PTI inputs)