Foreign Institutional Investors Drive $6 Billion into India’s Equity Market in September 2024

FII Investment Trends in September 2024

In September 2024, foreign institutional investors (FIIs) demonstrated strong confidence as they injected nearly $6 billion into India's equity markets. This influx marks a pivotal moment, representing the highest monthly purchase of the year. Interestingly, this surge follows a four-month streak of consistent buying activity, a stark contrast to September outflows recorded in both 2023 and 2022, which saw investors pulling out around $2.3 billion.

Factors Behind the Recent Outflow

The primary drivers of this renewed investment are India's enhanced weight in global indices, improved earnings visibility, and upcoming significant initial public offerings (IPOs). Investor sentiment remains buoyed as they anticipate continued momentum in the markets.

Comparative Analysis with Other Emerging Markets

Among emerging markets, India led the pack, attracting the largest inflows in September, followed by Indonesia at $1.6 billion and the Philippines with $345 million. Meanwhile, Mark Mobius, a prominent figure in the emerging markets investment space, posited that strong performance in China could enhance fund flows across the entire sector, creating a ripple effect.

Future Projections and Market Dynamics

With the Sensex closing at 84,299.78 points, analysts project a potential rise to the 1 lakh mark by year-end, contingent on regulatory factors not altering current trends. For context, the Sensex has gained 17% so far in 2024, following an approximate 19% return during 2023.

Valuation Perspectives

Despite the influx, overseas investors remain cautious due to perceived high valuations in the Indian market compared to its peers—Nifty50 trades at 21.5 times forward earnings versus 12.4 for China and 8.5 for South Korea. This indicates a potential reevaluation of investment strategies moving forward.