India’s economic growth is hovering around 7 percent. In such a situation, it has become the most attractive place for investors from all over the world. In the month of August, foreign portfolio investors have invested a lot in the country, but the interesting thing is that this investment has not been made in the stock market nor has it come in the form of Foreign Direct Investment (FDI) in the country. So where has this money been invested?
You will get this information by checking the depository data. So far in August, foreign investors have invested Rs 11,366 crore in the bond market. With this, the net cash inflow into the country’s bond market has crossed Rs 1 lakh crore this year.
Impact of JP Morgan’s rating
JP Morgan’s June report may give some credence to foreign investors who are pouring a lot of money into the country’s bond market. In June this year, JP Morgan included the Indian bond market in its ‘Emerging Market Government Bond Index’. Since then, cash flow into the country’s bond market has increased. According to depositories’ data, foreign portfolio investors (FPIs) have invested Rs 11,366 crore in the bond market this month (till August 24).
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There has been a net investment of Rs 22,363 crore in July, Rs 14,955 crore in June and Rs 8,760 crore in May in the Indian bond market. While prior to this, the FPI had withdrawn Rs 10,949 crore in April. With this latest cash flow, the net investment by FPIs in bonds so far in 2024 has reached Rs 1.02 lakh crore.
What do market experts say?
Market experts say that India’s inclusion in the global bond index was announced in October 2023. Since then, FPIs have started investing in the Indian bond market with high expectations. Their investment is continuously increasing and the cash flow is stable.
On the other hand, due to the yen carry trade i.e. stopping investment in other countries’ assets by borrowing from countries with low interest rates, fear of recession in the US and ongoing conflicts globally, FPIs have withdrawn Rs 16,305 crore from equities, making them more than Rs 1,000,000 so far this month. Himanshu Srivastava, Associate Director (Research Management) at Morningstar Investment Research India, says the announcement of capital gains tax hike on equity investments in the Budget has boosted these sales to a large extent. Apart from this, FPIs are cautious due to the overvaluation of Indian equities, he said.
