FPIs infuse $6.2 billion into Indian equities in August 

When the month of August 2022 started, there were strong apprehensions if the FPI flows of July would sustain in August. In fact, it has not just sustained in August but it has grown manifold. The scepticism was not hard to fathom. Between October 2021 and June 2022, the FPIs were net sellers in equities in every month and took out $33 billion from Indian equities in this period. July marked the first turnaround month with net equity inflows of $618 million. But flows in August have been robust and surprisingly affirmative.

As the data above confirms, the month of August till the close of trading on 29th of August 2022 has seen net FPI inflows of Rs49,150 crore. In dollar terms that is nearly $6.18 billion or ten times the net inflows into equities in the previous month of July. That is a clear signal that the foreign portfolio investors are turning risk on and willing to bet on emerging markets like India. It is not just the promise of GDP growth and steady corporate results, but even the stabilizing of the rupee around the 80/$ levels has helped dollar returns.

Three factors that triggered the FPI return in August 2022

 1) Firstly, Indian macros have been relatively favourable for global investors. Even the IMF has identified India as the fastest growing large economy. After all, there are not too many economies in the world that are likely to grow at 7.2% with a $3.5 trillion GDP base. In addition, the RBI has been fairly proactive in hiking rates aggressively. That has brought down inflation and promises to boost real GDP growth in the coming quarters.

    2) Corporate results in the last few quarters have been under pressure but Indian companies have done well overall. Despite margin pressure across industries, most Indian companies did well on the top line. The sales may not have been driven by volume growth, but price growth is also commendable in such circumstances. 

    3) Finally, the rupee has stabilized around the 80/$ levels despite the dollar consistently strengthening. That has protected dollar returns and given an incentive to FPIs to make fresh investments. That probably explains the sudden surge of interest in Indian equities.