Synopsis: Foreign Institutional Investors (FIIs) have poured Rs 32,465 crore into Indian markets over just eight sessions, undeterred by India-Pakistan tensions. A weakening dollar and India's strong economic fundamentals are powering the rally.
Article: Amid rising geopolitical tensions between India and Pakistan, Foreign Institutional Investors (FIIs) have made a strong comeback to Indian equities. Over the last eight trading sessions, FIIs have collectively invested Rs 32,465 crore, signaling a sharp shift in sentiment that highlights India's growing resilience in the global financial landscape.
What’s Driving the FII Comeback?
According to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, two major factors are fueling this trend:
Weakening Dollar: The US dollar index, which had peaked at 111 in January 2024, has now fallen to around 99. This reversal is steering momentum traders back towards emerging markets like India.
Slowing US Growth vs. Resilient India: As US economic growth shows signs of cooling, India’s economy continues to thrive with growth rates above 6% and strong corporate earnings recovery.
These factors make India an attractive alternative for global investors looking for high-growth opportunities in a turbulent world.
Optimism In the New Financial Year
Despite geopolitical risks, Manoj Purohit, Partner and Leader of Financial Services Tax at BDO India, noted strong optimism for India in the new financial year. India’s market revival, combined with policy stability, continues to draw in Foreign Portfolio Investors (FPIs).
Even though net inflows were marginally negative in some recent sessions, the broader outlook remains robust due to India’s positioning as a growth powerhouse.
India's Strong Economic Fundamentals
India's economic fundamentals are working in its favor:
- Policy Reforms: Continued focus on ease of doing business and infrastructure development.
- Export Opportunities: Modest US tariffs compared to other Asian countries offer India a competitive edge.
- Open Investment Gateway: RBI’s decision to keep FPI limits on corporate bonds and G-secs unchanged signals a welcoming stance for offshore investors.
Purohit emphasized that India's skilled workforce, large consumer base, and digital transformation initiatives strengthen its attractiveness for foreign capital inflows.
Investment Opportunities and Challenges
While short-term challenges such as high market valuations, inflation pressures, and geopolitical uncertainties exist, the bigger picture remains highly favorable for India.
Purohit added, "The Indian economy appears well-insulated to withstand temporary headwinds," making it a prime destination for long-term investments, even in risk-averse climates.
Disclaimer: This article is based on market reports and expert opinions. Investment decisions should be made after consulting financial advisors, considering personal risk profiles and market volatility.
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