After turning net buyers last month, foreign investors continued their positive stance on Indian equities and invested over ₹14,000 crore in the first week of August amid softening of the dollar index.

This was way higher than the net investment of nearly ₹5,000 crore by Foreign Portfolio Investors (FPIs) in the entire July, data with depositories showed. FPIs had turned buyers in July after nine straight months of heavy net outflows, which started in October last year. Between October 2021 and June 2022, they sold a massive ₹2.46 lakh crore in the Indian equity markets.

Hitesh Jain, Lead Analyst - Institutional Equities, Yes Securities, said FPI flows are expected to remain positive during August as the worst for the rupee seems to be over and crude oil price seems to be confined in a range.

According to data with depositories, FPIs infused a net amount of ₹14,175 crore in Indian equities in the first week of August.

The change in FPI strategy has imparted strength to the recent market rally. "The decline in the dollar index from the high of above 109 last month to below 106 now is the principal reason for FPI inflows. This trend may continue," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

FPIs have turned buyers in sectors like capital goods, FMCG, construction and power. In addition, FPIs poured a net amount of ₹230 crore in the debt market during the month under review.

Geopolitical risks

“The recent correction in the Indian equity markets has provided a good buying opportunity, and FPIs have been taking advantage of the same by hand-picking high-quality companies,” Himanshu Srivastava, Associate Director - Manager Research, Morningstar India said.

According to Srivastava, the flows have been largely driven by short-term trends. Further, the China and Taiwan equation is another watching point and rising tensions between the two could disturb and enhance geopolitical risks in the region. “This could adversely impact the flows,” he said.

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