Looking ahead, FPI entry into India is likely to remain volatile given headwinds in terms of high oil prices, inflation and tight monetary policy, according to Shrikant Chouhan, Head of Equity Research (Retail), Kotak. Securities.
“Recently, there are signs of exhaustion of selling by FPIs, and domestic institutional investors (DIIs) and retail buying are emerging as a strong counter to FPI selling.
“At higher levels, FPIs can continue to sell. If global markets are stable, FPI selling will easily be absorbed by DII plus retail buying,” said VK Vijayakumar, chief investment strategist at .
Overseas investors have remained net sellers for the seven months to April 2022, withdrawing a whopping Rs 1.65 lakh crore from the shares.
FPIs became net investors in the first week of April due to a correction in the markets and invested Rs 7,707 crore in shares.
However, after a brief respite, they once again became net sellers in the following weeks.
FPIs have divested shares worth Rs 39,137 crore net between May 2 and May 27, depository data showed. There are still two trading sessions left in the month.
“Relatively high valuations in India, rising US bond yields, an appreciating dollar and concerns about the possibility of a US recession triggered by aggressive tightening are factors behind the withdrawal of the FPI,” said Vijaykumar.
Himanshu Srivastava, Associate Director – Research Manager, Morningstar India, said investors are also cautious due to fears that high inflation could hamper corporate earnings and hit consumer spending.
These factors, along with the continuation of the war between Russia and Ukraine, could further affect global economic growth.
Also on the domestic front, concerns about rising inflation, as well as further rate hikes by the RBI, and their impact on economic growth, were significant, it added.
The FPI sell-off continued in the month. However, the week closed on a slightly positive note. Part of the reason is that global markets took the negative US GDP numbers in stride and went higher. The problem was visible in the Indian markets, especially in the last two days of the week, said Vijay Singhania, president of TradeSmart.
Apart from the shares, the FPIs withdrew a net amount of around Rs 6000 crore from the debt market during the period under review.
Apart from India, other emerging markets including Taiwan, South Korea, Indonesia and the Philippines have also witnessed outflows in the month of May to date. PTI SP ABM ABM