Net foreign investment in Indian stocks drop to lowest level in 3 months in August

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New Delhi: The net foreign investment in August in the Indian equity market declined to Rs 7,320 crore, marking the lowest monthly investment in the past three months.

This drop is particularly stark when compared to July, where foreign portfolio investors (FPIs) had invested Rs 32,365 crore, according to data from the National Securities Depository Limited (NSDL).

As per the data by NSDL, throughout August, foreign investors were largely net sellers in the Indian equity market. However, a significant shift occurred on Friday, 30 August, when FPIs made a record net investment of Rs 14,518.14 crore in a single day, turning the overall monthly investment positive.

The data also highlighted that the foreign investors during the last week of August (Aug 26 to 30) made a record net investment in the equity market of Rs 23,585.92 crore, which turned the overall investment in the month positive.

"FPI investment in equity is steadily coming down recently with net investment of only Rs 7320 crores in August compared to Rs 32365 crores in July. The fundamental reason for the poor FPI interest is the high valuation in the Indian market. With Nifty now trading at above 20 times estimated FY 25 earnings, India is the most expensive market in the world now" said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

The experts also pointed out that the FPIs have opportunities to invest in much cheaper markets and, therefore, their priority is markets other than India. The bulk of the buying that FPIs are doing are through the 'primary market and others' category. In the cash market, they have been consistent sellers because of the elevated valuations.

"Valuations in the Indian equity market have risen to relatively high levels, leading FIIs to exercise caution when investing in India. They have been selectively investing in defensive market segments, focusing on sectors such as healthcare and FMCG. On the debt market front, the strong buying trend among FIIs can be traced back to India's addition to JP Morgan's Emerging Market government bond indices earlier this June" said Vaibhav Porwal, Co-founder, Dezerv.

FPIs, which involve investors acquiring foreign financial assets, play a significant role in influencing market dynamics by channelling substantial funds into the Indian equity market.