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FPIs have invested Rs 47,148 crore in June on top of the Rs 43,838 crores in May.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said valuations in India are rich, from a short-term perspective. Therefore, even while continuing to invest in India, FPIs are likely to turn a bit cautious, going forward.

Sustained FPI flows triggered by India’s steadily improving macros have taken markets to record highs. The major reason for the sustained FPI flows into India is the reversal in FPI strategy, he said.

Japan is attracting the largest FPI flows this year in response to reforms and improving economic prospects after many years. 

FPI money is chasing performance and prospects. FPIs continued to invest in financials, automobiles, capital goods and construction related stocks.

January and February 2023 saw massive flows to China triggered by China’s opening up after Covid and expectations of revival in growth and earnings.

The FPI strategy was 'Sell India, Buy China'.

FPI investment in India in January and February combined was negative Rs 34,146 crore. This strategy was based on the view that China is cheap and India is expensive, he said.

This strategy proved to be a mistake since the prospects of China deteriorated and that of India improved. The Chinese economy is struggling and growth is expected to be muted for many years to come.

On the other hand, India’s macros are steadily improving, and GDP and corporate earnings growth have the potential to improve further from here. So FPIs have reversed their strategy to 'Buy India, Sell China', he added.