May 5th 2024.
Investors from other countries are currently taking a cautious approach as India's general elections are underway. In the first two trading sessions of May, they have only invested Rs 1,156 crore, which is significantly lower compared to the Rs 8,700 crore they withdrew in April. This withdrawal was due to concerns over changes in India's tax treaty with Mauritius and the increasing yields of US bonds. However, in March and February, they had made net investments of Rs 35,098 crore and Rs 1,539 crore respectively.
According to Himanshu Srivastava, Associate Director and Manager Research at Morningstar Investment Research India, foreign investors are waiting for the election results before making any major moves. The ongoing elections have influenced their cautious approach towards the Indian market. Meanwhile, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believes that the recent mixed data from the US has not affected the perception of a strong economy. He also mentioned that the US markets rallied on Friday due to the slowing economy and the possibility of rate cuts later this year.
During the first two trading days of May, foreign investors invested Rs 1,156 crore in equity and sold Rs 1,727 crore in debt, as reported by the depositories. However, before this, they had made significant investments in March and February. In contrast, the debt market saw a withdrawal of Rs 1,727 crore during this period. This was preceded by an inflow of Rs 13,602 crore in March, Rs 22,419 crore in February, and Rs 19,836 crore in January. These investments were driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index, which is expected to bring in USD 20-40 billion in the next 18 to 24 months.
Looking ahead, the flow of investments will depend on the direction of interest rates, according to Srivastava. The total inflow for 2024 so far stands at Rs 3,378 crore in equities and Rs 43,182 crore in the debt market. This shows that despite the cautious stance of foreign investors, they still have confidence in the Indian market. Overall, the ongoing elections and the global economic situation will continue to influence their investment decisions.
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