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FPIs invest ₹91.7B in India’s financial sector; healthcare among top picks

Foreign investors resumed their focus on Indian financial stocks after the recent elections, lured by policy stability and the potential for US rate cuts, pushing financial indices up nearly 8% in June.

In June, Foreign Portfolio Investors (FPIs) ended a two-month selling streak, investing 91.7 billion rupees (approx. $1.1 billion) into India’s financial sector, according to the National Securities Depository Ltd (NSDL). This marked the highest inflow since December 2023 and boosted indices for financials, private banks, and banking stocks by 6.9%-8%. Political stability after the national elections has reassured FPIs about policy continuity, mirroring sentiments from a senior investment officer at Shriram Life Insurance. This new confidence sharply contrasts with early June’s high outflows, which followed a weaker mandate for the National Democratic Alliance.

For markets: Foreign interest revives Indian stocks.
India’s major indices, Nifty 50 and S&P BSE Sensex, surged by around 7% in June, marking their best monthly performance this year. Investors are drawn to Indian stocks due to potential US rate cuts, enhancing the arbitrage between US and Indian markets. Sectors like telecommunications, consumer services, capital goods, and healthcare saw inflows of 27 billion to 80 billion rupees, keeping market sentiment positive.

The bigger picture: Wider implications for global finance.
The ongoing interest in Indian stocks could signal a broader shift in global finance. Investors are increasingly valuing capex-linked themes such as manufacturing, infrastructure, and defense, along with consumption-linked themes in telecommunication and real estate. Soft US labor data has also raised hopes for a rate cut in September, particularly benefiting Indian IT companies. These trends suggest a potential reallocation of global capital towards emerging markets like India, driven by the search for higher returns and policy stability. Finimize

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