Foreign Portfolio Investors (FPIs) remained net sellers for seven months to April 2022, withdrawing a massive net amount of more than Rs 1.65 lakh crore worth of shares.
Looking ahead, the FPI sale will continue in the coming weeks as heat waves in the market and abroad will make investors sweat a little more, said Vijay Singhania, president of TradeSmart, adding that the sale has caused FPI’s stake in Indian companies to fall to 19.5 per cent, the lowest since March 2019.
After a six-month sell-off, FPIs became net investors in the first week of April due to the correction in the markets and invested Rs 7,707 crore in stocks.
However, after a brief respite, they once again became net sellers during the holiday-shortened week of April 11-13, and the sell-off continued in the following weeks as well.
FPI flows continue to be negative May YTD with around Rs 25,216 crore sold between May 2 and May 13, depositories data showed.
RBI in an off-cycle monetary policy review on May 4, raised the policy repo rate by 40 basis points (bps) effective immediately and CRR by 50 bps effective May 21. Along similar lines, the US Federal Reserve also raised rates by 50 bps on May 4, the biggest hike in two decades.
Among investors, these developments fueled fears that further major rate hikes are likely in the future. This triggered a sell-off in Indian stock markets by foreign investors, which also continued this week, said Himanshu Srivastava, Associate Director – Managing Research, Morningstar India.
“FPIs have been selling in India from November 2021 onwards on valuation concerns. Rupee depreciation adds to FPI concerns. Dollar appreciation is broadly negative for emerging market equities. Y this will continue to be a factor that will trigger FPI exits from India.” VK Vijayakumar, chief investment strategist at
Apart from the shares, the FPIs withdrew a net amount of Rs 4,342 crore from the debt market during the period under review.
“Indian bonds have become unattractive due to high yields as the RBI has been slower to raise rates compared to the US Federal Reserve.
According to Morningstar’s Srivastava, “In addition to rate hikes by both the RBI and the US Federal Reserve, uncertainty surrounding the Russia-Ukraine war, high domestic inflation numbers, volatility in Crude prices and weak quarterly results don’t paint an overwhelmingly positive picture. Recent rate hikes could also slow the pace of economic growth, which is also cause for concern.”
Apart from India, other emerging markets including Taiwan, South Korea and the Philippines have witnessed an outflow in May year to date.