Foreign portfolio investors have extended their buying streak into a second consecutive month in August, marking the first such instance since November last year. According to CNBC TV18, foreign investors have cumulatively bought nearly $5 billion worth of Indian shares over the past two months, with July alone seeing inflows of approximately ₹20,200 crore. This represents a significant turnaround from the $27 billion worth of Indian equities sold between March and June. The previous instance of two consecutive months of buying was in October and November, when FPIs bought about $1.3 billion worth of shares, making the current streak particularly notable.
Brent crude has climbed to around $92 per barrel by the end of July amid renewed tensions around the Strait of Hormuz, creating significant challenges for India's economy. As reported by Business Standard, the rupee was already hovering around ₹95.4 per US dollar, creating an uncomfortable combination for investors. July CPI inflation rose to 4.45%, above the Reserve Bank of India's 4% target, with food prices driving much of the increase. The RBI expects FY27 inflation at 5.1%, with a potential peak of 5.9% in the third quarter.
Improving earnings visibility has significantly helped shift foreign investors' sentiment towards Indian equities. The combined net profit of Nifty500 companies rose 13% year-on-year to ₹4.4 lakh crore in the June quarter, while revenue increased 21% to ₹39.2 lakh crore. According to CNBC TV18, Sailesh Raj Bhan, CIO-Equities at Nippon India Mutual Fund, noted that "visibility on earnings improvement is better than it has been at any time in the last two to three years." The Nifty50 is currently trading at about 18 times 12-month forward earnings, below its five-year average of around 20 times, according to Bloomberg data. Valuations in consumer discretionary segments such as hotels and consumer durables have also moderated, with consumer staples trading at around 30 times earnings.
The latest buying by overseas investors has been selective rather than broad-based, with a significant portion of the inflows coming through block deals, qualified institutional placements (QIPs) and offers for sale (OFS). According to CNBC TV18, the Indian market saw combined IPO, QIP and OFS issuances worth more than ₹1.2 lakh crore in July and August. Among emerging markets, Taiwan attracted the highest foreign inflows in August at $9.1 billion, followed by India at $2.1 billion, while South Korea saw the highest outflows at $8.6 billion. Meanwhile, domestic institutional investors (DIIs) bought $5.4 billion worth of shares in August, following purchases of $3.7 billion in July, though domestic buying has slowed with purchases over the past two months nearly 50% below their preceding six-month average.
Gold is currently treading water ahead of Federal Reserve Chair Jerome Powell's Jackson Hole speech, which could provide crucial insights into future monetary policy direction. According to ETMarkets, this uncertainty is creating mixed signals for global markets, with investors closely watching for signals on potential rate cuts or policy shifts. The combination of FPI inflows extending to two consecutive months, improving earnings visibility, and selective buying patterns suggests India's market fundamentals continue to attract international investors despite global uncertainties and oil price pressures.
