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"September has begun with huge volatility in FPI flows. On 1st September FPIs bought equity worth Rs 4262 cr through exchanges but the very next day they sold equity worth Rs 2261 cr.

 This erratic trend is due to the uncertainty regarding dollar index and US bond yields. There is a view that the dollar and bond yields have peaked and when inflation starts trending down the Fed will be less hawkish than now. This will facilitate more capital flows to emerging markets and India is the best emerging market to invest now. The other view is that since inflation is high the dollar will continue to rise adversely impacting capital flows to emerging markets. The trend on this is not yet clear.

FPIs are likely to continue investing in India. They have learned that exit is easy but entry is expensive. FPIs have been buying financials, capital goods autos and FMCG. This trend is likely to continue."