Foreign investors have infused Rs 7,320 crore in the Indian equities in August owing to high valuation of stocks.
Meanwhile, Foreign Portfolio Investments (FPIs) infused Rs 17,960 crore in the debt markets in August.
They adopted a cautious stance amid the unwinding of the Yen carry trade after the Bank of Japan raised interest rates.
Notably, the investment in August was way lower than Rs 32,365 crore in July and Rs 26,565 crore in June, according to data with the depositories.
The fundamental reason for the poor FPI interest compared to the preceding two months is the high valuation in the Indian market. With Nifty trading at above 20 times estimated FY25 earnings, India is the most expensive market in the world now.
FPIs have been selling in the secondary market, where valuations are perceived to be high, and redirecting their investments towards the primary market, which offers relatively lower valuations.
With this, FPIs investment in equities has reached Rs 42,885 crore and Rs 1.08 lakh crore in the debt market in 2024 so far.
Further, the Domestic institutional investors (DIIs) have stepped up buying in the equity market in August, deploying a net Rs 48,347 crore, the highest in three months.
The surge in DII inflows came amid softening of foreign institutional investor (FII) investments.
In 2024 so far, FIIs have invested a net of Rs 43,878 crore. In the same period, DIIs have put in over Rs 3 trillion.
The strong flows helped the market scale new highs during the month.
Notably, the DII flows have remained positive for 13 consecutive months now. The last time they were net sellers was in June 2023.-