India has experienced higher inflows of Foreign Portfolio Investments (FPIs) this year as compared to many Asian countries. From January to the present, India has attracted nearly $13 billion in FPI inflows. In comparison, countries like Taiwan have received much lower amounts, and markets such as the Philippines have even witnessed outflows.

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This influx of FPIs marks India's largest buying spree since December 2020, indicating a disproportionate amount compared to its peers. While data for China is unavailable, other market trends confirm India's strong position.

South Korea and Taiwan, for instance, have received only about $9-9.5 billion each. In contrast, the Philippines has experienced an outflow of approximately $430 million, and Thailand faced an outflow of about $3.5 billion.

Several factors contribute to India's attractiveness for FPIs. The country's macroeconomic situation has significantly improved, prompting increased investor confidence. Rating agency Fitch recently raised its GDP forecast, while robust GST collections and positive sentiment indicators in sectors like automobile and cement sales further bolstered investor sentiment.

Another crucial factor favouring India is its reasonable valuations despite the market rally. Current market valuations align with historical averages, with price-to-earnings ratios of around 19 to 20 times. To be precise, the Nifty one-year forward is trading at 18.75 times, only slightly higher than the 10-year average of 17.50 times, indicating that the market is still reasonably priced.

However, it is essential to consider the potential risks associated with the current investor sentiment. Investor optimism has reached an extremely bullish level, as evident from CLSA's note reporting a 92 percent bullish India bull-bear index following the 15 percent rally in the Nifty over the past four months.

(Edited by : Pradeep John)