Foreign Portfolio Investors (FPIs) pumped Rs 47,148 crore in Indian equities in June, making it the highest inflow in 10 months, enthused by the country’s steadily improving macroeconomic fundamentals.

However, inflows in July may be subdued as FPIs might adopt a cautious stance due to the recent comments from the US Federal Reserve, Mayank Mehraa, Smallcase manager and principal partner at financial consultancy Craving Alpha, said.

Besides, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said FPIs are likely to turn a bit cautious going forward as valuations in the country are rich from a short-term perspective.

According to the data, FPIs invested a net sum of Rs 47,148 crore in Indian equities in June.

This came after a net investment of Rs 43,838 crore in equities in May, Rs 11,631 crore in April and Rs 7,936 crore in March, data with the depositories showed.

Before that, FPIs pulled out over Rs 34,000 crore from equities in January and February.

June marks the highest level of investment by FPIs in the last ten months. Before this, they invested a net sum of Rs 51,204 crore in equities in August 2022, the data showed.

FPIs continued to stay bullish on Indian markets primarily due to upbeat domestic macros, coupled with intense monsoon activity and a gloomy global economic picture, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said.

Geojit’s Vijayakumar said that sustained FPI flows triggered by India’s steadily improving macros have taken markets to record highs. The major reason for the sustained FPI flows into India is the reversal in FPI strategy to “Buy India, Sell China”.

Earlier in January and February, foreign investors were pulling out from Indian equities, and they were hugely investing in China as it opened up after Covid and expectations of a revival in growth and earnings.

Himanshu Srivastava, Associate Director, Manager Research at Morningstar India, said that sentiments have been boosted after the US Federal Reserve pressed the pause button on its rate hike cycle, triggering flows into emerging markets like India. This indicates that FPIs are expecting better growth from the Indian markets.

Another factor that has aided flows into Indian shores is the concern over China’s economic recovery. There has also been an uncertain environment in the US and UK, he added.

In terms of sectors, FPIs continued to invest in financials, automobiles, capital goods and construction-related stocks.

Apart from equities, FPIs invested around Rs 9,200 crore in the debt market in June.

So far in 2023, foreign investors have put in Rs 76,406 crore in the Indian equities and Rs 16,722 crore in the debt markets.