On the other hand, foreign institutional investors continued to be aggressive buyers this week, pumping in ₹14,064 crore into the cash market as Indian markets showed resilience amid strong economic performance, data released on Saturday shows.
Total FII investments up to 20 September stood at ₹33,699 crore. According to NSDL, this means total FII investment in India for the fiscal year at ₹76,585 crore. Market analysts believe the trend of FIIs buying will continue in the days ahead.
According to Manoj Purohit of BDO India, for the first time in four years, the US Federal Reserve has cut its interest rate and reduced rates by a larger-than-expected 50 basis points, and FPIs have responded with a measured reaction.
The Indian markets reflected their resilience in a positive way, driven by strong fundamentals and robust economic performance in line with the expected GDP growth," Purohit said. September has reported the second-highest inflows of 2024 after March.
Analysts claim that the influx by FII funds has seen the rupee appreciate 0.4% for the week ending September 20, which may encourage more investment into the country by FII. The significant pulling factors for emerging markets such as India, despite global uncertainties, are the centric fiscal deficits, downward influences of rate cuts on the currency of India, strength in valuations, and an assured commitment by the RBI to deal with inflation without rate adjustments.
Critics say that the IPOs announced this year have already attracted huge foreign investments, making the Indian capital market look more attractive as a safer destination than riskier countries. The ball now lies in the RBI's court to see if it will follow the lead with a repo rate cut in October or wait until December.
There is a good case for a minor rate cut to tame food inflation and check erosion in household savings interest that could dent the retail lending of banks. "India monetary policy has been fairly sanguine, even by the Fed moves so far," added Purohit.
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