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As the unemployment rate falls in the US but hiring slows down as Federal Reserve gears up for a rate cut this month, the developments are likely to push foreign portfolio investors (FPIs) increase their investments in India, market experts said on Saturday. 

Early September witnessed buying by FPIs mainly due to the resilience of the Indian market.

FPIs invested Rs 9,642 crore in equity through the exchanges and Rs 1,388 crore through the ‘primary market and others’ category till September 6.

According to Sunil Damania, Chief Investment Officer, MojoPMS, flows from FPIs are influenced by a complex interplay of factors beyond bond inclusion.

Key drivers include geopolitical dynamics, the health of the US economy, Yen borrowings, and prevailing risk-off strategies.

“Global market sentiment has notably shifted towards caution, as evidenced by Nvidia's 25 per cent decline after reaching a record high in June,” he mentioned.

The latest jobs data in the US indicates slowing US economy which in turn has pushed up expectations of rate cut by the Fed in September, perhaps by even 50 bp.

If the US growth concerns impact global equity markets in the coming days, FPIs are likely to use the opportunity to buy in India, said analysts.

Concerns over a potential US recession and China's ongoing economic challenges are critical considerations for investors re-evaluating their allocations.

If the risk-off strategy continues to gain traction, emerging markets may experience a slowdown in FPI inflows, said experts.

In August, FPIs invested Rs 7,320 crore in equity compared to Rs 32,365 crore in July. They infused more than 11,366 crore in the Indian debt market, pushing the net inflow tally in the debt segment to more than the Rs 1 lakh crore mark in 2024 to date, according to NSDL data.