Sat Sep 21 11:08:21 UTC 2024: ## Foreign Investors Flood Indian Markets Following US Rate Cut
**Mumbai, India** – Buoyed by the US Federal Reserve’s recent half-percentage point cut in benchmark interest rates, Foreign Portfolio Investors (FPIs) have aggressively poured money into Indian equities, injecting approximately ₹11,500 crore in just five trading sessions. This surge in investment has pushed the total net inflows for September to ₹33,691 crore, exceeding the monthly inflows seen in six of the past eight months this year.
This latest influx brings the total net FPI investment for 2024 to ₹76,585 crore, according to depository data. The buying frenzy reached a peak on Friday, the day after the Fed’s first rate cut in over four years, with FPIs purchasing Indian equities worth ₹14,064 crore in the cash market alone. This marked a three-year high for daily FPI buying.
Analysts attribute this aggressive investment to the Fed’s rate cut, seen as a significant shift in monetary policy, and the resulting decline in US bond yields. This has prompted FPIs to seek investment opportunities in emerging markets like India, offering potentially higher returns.
“The trend of FPI buying is likely to continue in the coming days,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. “The flood of FPI money has already appreciated the Indian rupee by 0.4 percent this week, which could further boost FII buying. However, there is a concern that the market could become overheated and valuations stretched.”
Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India, added that India’s balanced fiscal deficit, the impact of rate cuts on the Indian currency, strong valuations, and the Reserve Bank of India’s commitment to controlling inflation, all make India an attractive destination for foreign investments.
He further noted that the numerous IPOs announced this year have drawn significant foreign capital, contributing to the buoyancy of the Indian capital market.
While the US Fed has acted, eyes are now on the Reserve Bank of India (RBI) to see whether it will follow suit by cutting the repo rate in October or wait until December. Some analysts advocate for a marginal rate cut to manage food inflation and boost retail lending.
The Indian government is actively working to make its capital market as conducive as possible for foreign investment, recognizing the importance of these inflows to the country’s economic growth.
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