India's Foreign Investment Surges To $28.7 Bn, Aims For Continued Growth In 2024
India witnessed a turnaround in Foreign Portfolio Investment (FPI) flows, reaching USD 28.7 billion in 2023, signalling a significant shift from the USD 17.9 billion outflows recorded in 2022. The surge in FPI inflows positions India as an attractive investment destination, with positive trends expected to persist into 2024.
The FPI trajectory in 2023 displayed noteworthy volatility, commencing with a cautious start but gaining momentum as the year progressed. The equity segment emerged as a standout performer, experiencing a 3-year high with total inflows reaching USD 20.7 billion. Simultaneously, the debt segment witnessed a positive trend, particularly in the latter part of the year, driven by India's inclusion in JP Morgan's bond index in June 2024.
Further, the report stated that on a global scale United States maintained its position as the preferred choice for foreign investors, albeit with lower quantum flows in 2023. However, India solidified its standing as the top pick among Emerging Markets (EMs), supported by robust growth fundamentals. Other EMs, including Brazil, Thailand, and Indonesia, also experienced renewed FPI inflows, reflecting a broader trend favouring EMs.
The primary drivers behind the FPI influx into India were perceptions regarding the trajectory of Federal Reserve (Fed) rates and the performance of India. Changing expectations, coupled with India's strong growth fundamentals and stable inflation, positioned the country as a preferred choice for foreign investors.
Further, the report analysed that the positive momentum in FPI flows is anticipated to persist and intensify in the first two quarters of 2024. Factors such as the anticipated Federal Reserve rate-cutting cycle beginning in March 2024 and India's potential inclusion in other international bond indices are expected to maintain foreign investor interest. Strong equity inflows are likely to continue, providing short-term support for the Indian Rupee amid lacklustre Foreign Direct Investment (FDI) inflows.
Meanwhile, as of January 2024, FPIs have already injected USD 1 billion into India, setting a positive tone for the year ahead. Amid a dynamic financial landscape, investors are well-poised to navigate opportunities arising from shifting global economic dynamics and market sentiment.
