According to depository data with stock exchange, Foreign portfolio investors (FPIs) were net buyers to the tune of Rs 16,459 crore in Indian markets in August, with majority of investment coming in the debt segment.

In equities, they invested just Rs 2,082.94 crore while debt segment witnessed inflow of Rs 14,376.2 crore between August 2-31, depositories data showed. The volume of investment in the debt segment is the highest in this calendar year so far. "The main reason for Foreign portfolio investors buying debt is the rising spread between the bond yields in the US and India. The US ten-year is below 1.30 percent and the Indian 10-year has risen above 6.2 percent. Also, the stability in the Indian rupee has brought down the cost of hedging.

According to V K Vijayakumar, chief investment strategist at Geojit Financial Services,  Expectations regarding exchange rate also are favorable. At these high valuations in equity risk-reward favour debt." For equities, he said "the momentum in the market and the fear of missing the momentum might have brought FPIs back to equity in August. The global scenario also turned favorable with the Fed sending a dovish message that the economy has a lot more ground to cover and rate hikes are far away."

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