Foreign investors have infused over Rs 51 billion into the country's capital market in August — the second consecutive month of inflow — on improvement on the macro front, better corporate earnings and correction in the mid and small-cap space.
The latest inflow comes following a net infusion of over Rs 23 billion in the capital market — both equity and debt — in July. Prior to that, overseas investors had pulled out over Rs 610 billion during April-June.
According to the latest depository data, foreign portfolio investors (FPIs) pumped in a net sum of Rs 17.75 billion into equities in August and a net amount of Rs 34.14 billion into the debt market, taking the total to Rs 51.89 billion.
After three months of huge outflows from April till June, analysts said it is encouraging to see FPIs making a comeback in July and August.
"The recent net inflow could be attributed to improvement on the macro front, better earnings from corporate, correction in the mid and small-cap space and positive observations of International Monetary Fund (IMF) on India," said Himanshu Srivastava, Senior Analyst Manager Research at Morningstar.
"The direction is definitely positive. However, the quantum of inflows from FPIs is much lower than what we have seen in the past when they come with full conviction. It indicates that there is a fair bit of uncertainty and cautiousness among FPIs at the moment," he added.
Overall, so far this year, overseas investors have pulled nearly Rs 24 billion from equities and close to Rs 380 billion from the debt markets.