After heavy selling in October and November, foreign investors (FPIs) have once again returned to the Indian stock market. In the first two weeks of December, FPIs have invested a net Rs 22,766 crore in the Indian markets. This investment is driven by the expectation of interest rate cuts by the US Federal Reserve and the policies of the Reserve Bank of India (RBI).

October evacuation

In the last few months, there has been a lot of volatility in FPI investment. In October, foreign investors withdrew a record Rs 94,017 crore from the Indian stock market, which was the biggest figure this year. This was followed by another Rs 21,612 crore sell-off in November. Earlier in September, FPI investment had reached a nine-month high of Rs 57,724 crore. This volatility was a result of uncertainty about global economic conditions and US interest rates.

Return of investment in December

According to depository data, FPIs have invested Rs 22,766 crore in the Indian stock market till December 13. The possible cut in interest rates by the US Federal Reserve and the announcement of the Reserve Bank of India to reduce the cash reserve ratio (CRR) have again won the confidence of foreign investors.

Role of inflation and policy decisions

Investors' attitude in the Indian market was also influenced by the reduction in Consumer Price Index (CPI) based inflation. Inflation was 6.21% in October, which came down to 5.48% in November. This improvement has raised hopes that RBI will cut the repo rate in its upcoming monetary policy review.

Chinese musical instrument

In recent months, a trend of foreign investors withdrawing money from the Indian market and investing in China was observed. However, in December, foreign investors have given preference to the Indian market. In fact, the steps taken by the RBI to increase liquidity and better inflation rate figures have become a center of attraction for investors in the Indian market.

Further prospects

Talking to PTI, Himanshu Srivastava of Morning Star Investment Research says that the attitude of foreign investors will depend on the upcoming global and domestic economic indicators. Apart from this, inflation rate, interest rate cuts and third quarter results will affect the decisions of investors. Along with this, the current recovery in the market seems to be strengthening the confidence of foreign investors in the Indian stock market.

Let us tell you, so far this year, FPIs have made a net investment of Rs 7,747 crore in the Indian stock market. This flow shows that the stability and growth prospects of the Indian economy are attracting foreign investors.