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In FY24, Indian equities saw a total foreign inflow of Rs 2.08 lakh crore. Capital goods received the largest share at around Rs 46,935 crore, followed by consumer services, auto, and financial services with inflows worth Rs 32,186 crore, Rs 29,862 crore, and Rs 28,793 crore, respectively
There’s compelling data indicating successive governments have allowed the RBI to manage the rupee without much interference.
Bloomberg proposes to include India FAR government securities in the Bloomberg EM Local Currency Index, which will ensure flows into the Indian markets. Interest rate cuts may be announced in the US, potentially leading to a fall in the Dollar index. FDI inflows in India have been increasing, reaching $85 billion in FY 2021-2022. The Indian government's pro-growth policies and the China-plus-one doctrine are expected to further boost FDI. Investors should consider adding duration funds to their fixed income portfolio and investing in attractively-valued companies in the manufacturing sector.
Global investors snapped up $21 billion of shares on a net basis in 2023, but the pace has slowed this month ahead of the April-May polls where Prime Minister Narendra Modi is expected to win a third term. Many funds remain light on holdings of Indian stocks.
Herald Van Der Lindeof HSBC believes that earnings growth will remain strong, making Indian equities an attractive investment option. Unlike other markets in the region, India's macro story is resilient and supported by factors such as good export numbers, domestic investments, and a growing consumer base. Van Der Linde recommends investing in banks, consumer staples, and retailers. While there may be a tactical shift from small and midcaps to largecaps, he sees potential in domestic-oriented companies.