Political Stability Woos Global Investors Back To Indian Stocks After Two Months

Overseas investors closed an eventful June as net buyers of Indian stocks after being sellers for the last two months. The positive attitude was aided by assurance of policy continuity and a sharp recovery in markets.

The month kicked off with the worst crash in over four years on National Democratic Alliance returning to power with a tighter-than-expected election victory. But the world's fifth-largest stock market staged a stellar recovery a few days later after key ministerial allocations in the third term of Narendra Modi government remained unchanged.

After two consecutive months of outflows, foreign portfolio investors have made a net infusion of Rs 26,565 crore in equities last month, according to the data from National Securities Depository Ltd.

The guarantees of ongoing reforms after the government's policy continuity and an improved GDP growth forecast have attracted foreign portfolio investment buying, according to Vipul Bhowar, director, listed investments, Waterfield Advisors.

FPI buying has been focused on a few specific stocks, as Indian equities are still considered overvalued, Bhowar said.

Political stability despite BJP not getting the expected winning margin, and strong inflows from DII and retail investors, has forced the FPIs to turn buyers in India, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

With India's sovereign bond market making its global debut, overseas investors have invested Rs 14,955 crore in the debt market in June. With this, FPIs' investment in the debt market reached Rs 68,624 crore in 2024 so far.

The global inclusion is positive in the long term as this will reduce the cost of borrowing for the government and reduce the cost of capital for corporates, Vijayakumar said.

While global funds have been net buyers, the inflows may not be the highest among emerging markets. "However, the long-term outlook remains positive, providing reassurance about the stability of FPI flows in India," Bhowar said.