Mint Quick Edit | Foreign buyers of Indian equity are back at last: Will this trend endure?

Though these are still early days, the purchases seem consonant with a wave of economic optimism over an India-US trade deal in the works. Does this mark a turning point for foreign inflows? A cloud of gloom has lifted.

Earlier, as foreign investors exited, the rupee had slid, reducing the appeal of Indian assets. For this dynamic to durably reverse, India needs an insurge of foreign direct investments too. Perhaps New Delhi’s deal promise to vastly expand imports from the US is predicated on booming capital inflows overall, the flip side of an enlarged current account deficit.

How far equity prices go, however, would still depend on whether corporate earnings take a sharper incline than seen in their recent record. In other words, several factors must work in tandem to boost stock indices. For now, it’s a relief that household money going into mutual funds isn’t all that’s supporting stock prices.