Indian Equities Draw Foreign Capital as Bull Run Gains Momentum

Overseas funds return back to the Indian stocks. Resurgence seen in the $5 trillion market after election-related uncertainties news spread earlier. As net foreign purchases reach $8.5 billion this quarter, they are set to become the highest since mid-2023. 3rd term victory of Prime Minister Narendra Modi buoys investors, reinforcing their confidence in policy continuity. Moreover, with India's weightage surpassing China in global indexes, it’s enhancing the country’s appeal, especially as the Federal Reserve begins to cut interest rates.

Despite the higher valuations, the Indian equities continue to remain relatively attractive compared to the markets that have subdued growth prospects. NSE Nifty 50 Index, further is on track for the 9th consecutive annual gain, with favorable economic conditions and corporate performance, altogether driving the investor’s interest. Further, as the Chinese economy falters, India is now viewed as global growth’s key engine, especially after the IMF predicted it to be 3rd largest economy by the year 2028.

September quite likely is to mark 4th straight month for foreign inflows in India, thereby reversing $1 billion in the shares sold in the previous quarter. MSCI Indian Index also has risen 7% this quarter (in dollars), significantly outperforming broader gauge of the emerging market equities that is up around 2% now.

Besides equity inflows, India's IPO market is now booming, attracting overseas investors. The local firms are also capitalizing on expanding the economy as the smaller IPOs that dominated the year are now emerging with more significant deals.

However, market watchers continue to remain cautious regarding the potential populism after the Modi Party announced cash handouts right ahead of regional polls. Some of the advisors are also recommending trimming the investments in the pricier market segments. As of now, the stable currency of India and the stable and more robust growth narrative altogether continue to attract the global funds, highlighting the significance of it within the investment landscape.

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