In 2024, foreign investors have pulled back their investments in Indian stocks after a strong performance in 2023. They’ve put in over Rs 5,000 crore this year, mainly because prices are high in India and global tensions are making investors nervous. Looking to 2025, experts believe investments could recover, especially in Indian sectors like capital goods, manufacturing, and infrastructure. However, if companies’ prices stay high compared to other countries like those in Southeast Asia or Latin America, this might hold back investments.
Feroze Azeez from Anand Rathi Wealth thinks certain factors might boost investments, like global tensions easing, central banks lowering interest rates, and potential tariff changes in the U.S. Foreign investors have invested around Rs 5,052 crore in Indian stocks and Rs 1.12 lakh crore in debt markets until December 24 this year. Last year, they put in a whopping Rs 1.71 lakh crore into stocks, excited about India’s strong economy. In contrast, 2022 was tough, with a huge outflow of Rs 1.21 lakh crore because global banks raised interest rates aggressively.
In 2024, foreign investments in stocks dropped in January, April, May, October, and November. Analysts suggest that high prices pushed investors to look at cheaper stocks in China, especially since China is introducing new plans to support its economy. Global tensions, especially the Israel-Iran conflict, made investors wary, while worries about the U.S. elections and fewer expected interest rate cuts added to the fear.
In India, high valuations, weak company earnings, rising inflation, slow economic growth, and a weakening rupee have made investors less confident. Unlike stocks, foreign investors are showing great interest in Indian debt markets, investing Rs 1.12 lakh crore this year compared to Rs 68,663 crore last year. This growth is due to India being added to JP Morgan’s Government Bond Index, with even more foreign money expected as India is expected to join other global bond indices.
In the past, foreign investors pulled out money regularly, with a record Rs 1.05 lakh crore leaving in 2020. The financial services, oil & gas, and FMCG sectors saw the biggest withdrawals in 2024. In January, foreign investors took out Rs 25,700 crore, worried about rising U.S. bond yields. However, they returned to investing in February and March, putting in Rs 36,600 crore, encouraged by India’s strong growth and falling U.S. bond yields.
Unfortunately, this rebound didn’t last, and in April and May, investors were scared away by political uncertainties during general elections. They returned to buying in June, with a net investment of Rs 57,359 crore in September, driven by a rate cut from the U.S. Federal Reserve. But things took a turn again in October and November, with huge withdrawals totaling Rs 1.16 lakh crore. October alone saw Rs 94,017 crore leave, the biggest drop in a month, due to investors preferring Chinese stocks and concerns over Indian companies’ weak earnings. Thankfully, December showed signs of recovery, with more than Rs 20,071 crore flowing back into Indian stocks, showing renewed interest.
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