Up until December 20, foreign portfolio investors (FPIs) invested $20 billion in Indian stocks, the second-highest amount in the previous ten years. FPIs made $23 billion in market investments in India in 2020.
It is noteworthy that only Japan’s economy, which attracts $30 billion, is larger than India’s among Asian economies. This year, South Korea, which is in third place in Asia, has taken in around $9 billion in foreign exchange.
The fact that other economies, particularly those in Asia, are having a hard time right now has made India a safer wager throughout the year. Elections were held in Thailand, Taiwan had tensions with China, and Sri Lanka went through an economic crisis.
In order to achieve stability, FPIs typically adopt a cautious approach in the lead-up to the elections. However, this year has been an anomaly due to the confidence of a large majority for the ruling party, say market participants.
It is important to remember that when US bond rates rose to record highs in September and October alone, FPI withdrawals totaled around $4.8 billion. But as yields began to decline in November, the tide began to change. The markets now feel more confident that rate cuts are imminent as a result of the Fed’s dovish approach.
In a blatant indication of a shift in emphasis towards growth, the Fed projected three 75 basis point rate cuts in 2024. Over the previous week, the dollar index—which pits the dollar against the major world currencies—has dropped from 102.87 to 102.21.
