Foreign portfolio investors (FPIs) have emerged as consistent buyers, injecting Rs 6,139 crore into Indian equities in March. The surge follows a modest investment of Rs 1,539 crore in February and a significant outflow of Rs 25,743 crore in January, as per data from depositories.

Several factors contribute to this uptick in FPI inflows. Manoj Purohit, Partner and leader of FS Tax at BDO India, attributes the positive trend to India's robust economic growth, marked by a recent announcement of Q3 GDP numbers at 8.4 percent, along with the resilient performance of large Indian corporates. Regulatory announcements, including the removal of UAE from the grey list and Sebi's proposal to ease disclosure norms for regulated FPIs, have also bolstered investor confidence.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, underlines three primary reasons for the renewed interest in Indian equities: the resilience of Indian markets, a steady decline in US bond yields, and robust GDP growth. Despite these positive developments, concerns loom over high valuations, particularly in the mid and small-cap segments.

Apart from equities, FPIs have injected Rs 1,025 crore into the debt market during the review period. The move aligns with Bloomberg's announcement of India's bonds inclusion in its Emerging Market Local Currency Government Index, effective January 31 next year. Furthermore, FPIs have been channelling funds into the debt markets, anticipating the upcoming inclusion of government bonds in the JP Morgan Index.

JP Morgan's decision to add Indian government bonds to its benchmark emerging market index from June 2024 is anticipated to attract substantial investments, estimated at $20-40 billion over the subsequent 18 to 24 months.

(With PTI inputs)