Foreign investors made a notable return to the Indian stock market in the week of August 19-23, making a net purchase of equities amounting to Rs 4,897.16 crore. This marked a significant shift from the previous week, when foreign investors were net sellers, offloading equities worth Rs 7,769.73 crore. Despite this positive inflow, the overall net investment by foreign investors in August remains negative, with equities worth Rs 16,305 crore being sold so far this month. This trend highlights the volatility in foreign investment patterns during the month.
Interestingly, while foreign investors were net sellers in August, domestic investors have played a crucial role in supporting the Indian stock market. Data from the National Stock Exchange (NSE) shows that domestic investors have consistently bought into Indian stocks, purchasing equities worth Rs 47,080.38 crore in August. This strong domestic participation has provided stability to the market amid the fluctuating foreign investment trends.
According to Ajay Bagga, a Banking and Market Expert, it is essential for policymakers to continue fostering an environment that encourages domestic investment while ensuring that foreign investors remain an integral part of the market. Balancing the interests of both domestic and foreign investors will be key to sustaining growth and stability in the Indian stock market. India’s share in the MSCI EM Index has increased from 6.6 per cent in December 2012 to over 20 per cent in August 2024, showcasing the country’s growing influence in the global market.
In July, net foreign investments in the Indian stock market reached Rs 32,365 crore, with foreign investors being net buyers, as per data from the National Securities Depository Limited (NSDL). This marked a continuation of strong foreign interest following June when Foreign Portfolio Investors (FPIs) purchased Indian stocks worth Rs 26,565 crore on a cumulative basis. FPIs play a significant role in influencing market dynamics by channeling substantial funds into the Indian equity market.
Overall, the recent positive return of foreign investors to the Indian stock market, combined with strong domestic participation, highlights the importance of maintaining a balance between domestic and foreign investment. Policymakers will need to focus on creating an environment that attracts both types of investors to ensure sustainable growth and stability in the market. With India’s increasing presence in global indices, it is crucial to continue fostering a conducive investment climate to attract foreign investors and maintain domestic confidence in the market.
