Selling continues in FPIs; So far in May, Rs 39,000 crore has been withdrawn from equity
Continuing with their sell-off, foreign investors have dumped Indian equities worth over Rs 39,000 crore so far this month, amid rising US bond yields, dollar appreciation and prospects of a more aggressive rate hike by the Federal Reserve. With this, the net outflow from equities by Foreign Portfolio Investors (FPIs) has so far reached Rs 1.66 lakh crore in 2022.
Going forward, FPI inflows into India are likely to remain volatile, in the context of rising crude oil prices, inflation and tight monetary policy, according to Shrikant Chauhan, Head of Equity Research (Retail), Kotak Securities. “Recently, selling by FPIs is showing signs of exhaustion, and domestic institutional investors (DIIs) and retail buyouts are emerging as a strong counter to FPI selling. “At higher levels, FPIs may continue to sell. If markets globally are stable, FPI sales will be easily absorbed by DIIs and retail buying,” said VK Vijayakumar, chief investment strategist, Geojit Financial Services.
Foreign investors remained net sellers for the seven months to April 2022, drawing a massive Rs 1.65 lakh crore from equities. FPIs turned net investors in the first week of April as markets plunged and infused Rs 7,707 crore in equities.
However, after a short breath, they became net sellers once again in the following weeks. Data from the depositories shows that FPIs have made a net equity dump of Rs 39,137 crore during May 2-27. There are still two trading sessions left in the month.
Vijayakumar said, “Concerns related to the possibility of recession in the US due to higher valuations in India, rising bond yields in the US, strengthening of the dollar and aggressive tightening are the factors behind the withdrawal of FPIs. Morningstar India associate director-manager research Himanshu Srivastava said investors are also wary of fears that high inflation could hamper corporate profits and impact consumer spending.
These factors, along with the continuation of the war between Russia and Ukraine, could further distort global economic growth. He said that on the domestic front too, with inflation rising, there are concerns over further rate hikes by the RBI and its impact on economic growth.
Selling by FPIs continued in the month. However, the week closed on a slightly positive note. One reason for this is that global markets took negative US GDP numbers in their stride and moved higher. TradeSmart Chairman Vijay Singhania said the rub off was visible in the Indian markets, especially in the last two days of the week. Apart from equities, FPIs pulled out a net amount of about Rs 6,000 crore from the debt market during the period under review.
Apart from India, other emerging markets including Taiwan, South Korea, Indonesia and Philippines have also witnessed outflows in the month of May so far.
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