India sees surge in FPI inflows and rising forex reserves

India is experiencing a surge in capital inflows, marked by a significant turnaround in Foreign Portfolio Investor (FPI) activity. After four months of heavy selling, FPIs invested Rs 12,921 crore in the first week of August. This trend is supported by improving macroeconomic conditions, expectations of US interest rate cuts, and easing geopolitical tensions.

Domestic Institutional Investors (DIIs) have also shown strong momentum, recording net purchases of Rs 7,768 crore during the same period. This sustained buying by both FPIs and DIIs has contributed to positive sentiment in the equity market, with the Nifty index trending higher.

Parallel to equity inflows, India's foreign exchange reserves have climbed toward record highs. Reserves rose by $10.5 billion to $692.9 billion for the week ended July 31. Analysts suggest that Reserve Bank of India (RBI) initiatives, including measures to attract overseas capital and the use of FCNR deposits, have bolstered these levels, providing resources to stabilize the rupee.