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Business

Time: 2024-07-17

Insights on Rising Foreign Portfolio Investment in Indian Equity Market

Insights on Rising Foreign Portfolio Investment in Indian Equity Market
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Foreign Portfolio Investment on the Rise in Indian Equity Market

In the wake of the recent general election outcome in India , institutional investors from the US and Japan are showing increased interest in Indian equities . Following the re - election of the Modi - led NDA government for a third term , these investors are optimistic about the continuity in policies . According to NSDL data , the combined weight of US and Japan - based funds in the total equity exposure of Foreign Portfolio Investors ( FPIs ) in India has reached a record high of 45.1 % as of June 2024 , compared to the five - year average of 41.4%.

Regional Interest Rate Contrasts Influence Investment Decisions

Despite both US and Japanese funds focusing on the Indian market , their regional interest rate environments differ significantly . While the US is expected to see interest rate cuts this year , the Bank of Japan raised interest rates for the first time in 17 years in March . This divergence in interest rate policies has led investors to shift their focus towards the earnings growth potential in India , rather than relying on interest rate differentials between developed nations and the Indian market for investment opportunities.

The equity Assets Under Management ( AUM ) of US - based funds in India have reached a record high of 30.2 lakh crore ( 61 billion ) , equivalent to 70 % of the total equity value of India 's domestic mutual funds . Japanese funds have also seen a significant increase in AUM , rising by 70 % to 2.1 lakh crore ( 5 billion ) in June . Overall , FPI equity AUM in India grew by 39 % year - on - year to 71.4 lakh crore ( 56 billion ) , representing nearly 17 % of India 's total market capitalization.

Japanese Government Pension Funds Among Top Investors in Indian Companies

Notably , Japanese government pension funds are among the largest investors in key Indian companies such as Reliance Industries , Bharti Airtel , Larsen & Toubro , and TCS . These funds hold stakes in 162 Indian companies , accounting for 1.8 % of the total foreign equity holdings in India , which amounts to 78 billion . This trend highlights the growing confidence of international investors in the Indian equity market and its prospects for sustained growth in the future.

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