Foreign Portfolio Investors (FPIs) returned to a buying spree in June, marking a significant turnaround from previous months of selling. With a substantial inflow of ₹26,565 crore into Indian equities during the month, coupled with debt investments totaling ₹14,955 crore, FPIs ended June with a total investment of ₹41,757 crore, as reported by the National Securities Depository Ltd (NSDL).

The shift in FPI sentiment was largely attributed to the stabilization of Indian markets following a decline in the VIX volatility index. This improvement contrasted with earlier months influenced by factors such as uncertainty surrounding the Lok Sabha elections and global market dynamics, including robust performances in Chinese markets.

Explaining the pattern, Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that despite modest equity investments amounting to ₹11,162 crore for the year 2024 so far, FPIs have shown substantial interest in Indian debt, totaling ₹74,928 crore. This divergence was driven partly by the inclusion of Indian government bonds in global indices and proactive investor strategies.

In the fortnight ending June 30, FPIs focused their purchases heavily on telecom and financial services sectors, while also showing interest in autos, capital goods, healthcare, and IT. Conversely, they reduced their holdings in metals, mining, and power sectors, which had experienced rapid valuation increases in preceding months.

The volatility in FPI flows underscored their sensitivity to external factors such as US bond yield movements and comparative market valuations. When global conditions favor emerging markets like India, FPIs tend to increase their investments, often repurchasing stocks and sectors they previously sold, albeit at higher prices.

Milind Muchhala, Executive Director at Julius Baer India, expressed optimism about India's attractiveness for FPIs, citing its robust economic growth and earnings momentum. He emphasized that in a scenario where global sentiment favors emerging market equities, India could stand to benefit significantly from increased fund inflows.

Looking back, the year 2023 saw FPIs making substantial investments totaling ₹2.37 lakh crore across Indian equities and debt markets, with 2024 showing a notable preference for debt instruments amid evolving global economic conditions.

Overall, despite intermittent volatility and external pressures, India's market resilience and growth prospects continue to position it favorably in the eyes of foreign investors, making it a compelling destination for portfolio investments.