The relentless selling of Indian stocks by foreign investors continued as they pulled out just over Rs 25,200 crore from the Indian equity market in the first quarter of this month due to concerns over rising global interest rates and growing COVID cases.
“Higher crude prices, rising inflation, tightening of monetary policy, etc. have an impact on the indicators. In addition, investors are concerned about the prospect of growth while global inflation continues to improve. Therefore, we believe that the flow of FPI will be volatile in the near future, “said Srikanth Chauhan, Head – Equity Research (Retail), Kotak Securities.
Foreign portfolio investors (FPIs) remained among the net sellers for seven months from April 2022, withdrawing more than Rs 1.65 trillion net from equity.
FPI sales will continue in the coming weeks as heat waves in and out of the market will force investors to sweat a little more, said Vijay Singhania, chairman of TradeSmart. 19.5 percent, the lowest since March 2019
Six months after the sale, FPIs turned into net investors due to market correction in the first week of April and invested Rs 7,707 crore in equities.
However, after a few breaths, they again became net sellers during the April 11-13 holidays and continued to sell in the following weeks.
FPI inflows remained negative in May to date and sold around Rs 25,216 crore in May 2-13, data from depositors show.
In an off-cycle monetary policy review on May 4, the RBI raised the immediate repo rate by 40 basis points (bps) and the effective CRR by 50 bps on May 21. Similarly, the US Fed has also increased the rate by 50 bps May 4, the biggest increase in two decades.
Among investors, these developments raised fears that going forward, there is a possibility of even greater rate growth. This triggered a massive sell-off in the Indian equity market by foreign investors, which continued this week, said Himanshu Srivastava, Associate Director-Manager Research, Morningstar India.
“FPI has been selling in India since November 2021 for valuation concerns. The devaluation of the rupee is raising concerns among FPIs. Dollar appreciation for emerging market equities is largely negative. And that will continue to be a factor in triggering FPI outflows from India, ”said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
In addition to equities, FPIs withdrew Rs 4,342 crore from the debt market during the period under review.
“Indian bonds have become abnormal due to high yields as the RBI has slowed the hiking rate compared to the US Fed. Once the RBI rate is raised, it will be easier, ”said Sonam Srivastava, Smallcase Manager.
According to Morningstar’s Srivastava, “Unlike the RBI and US Fed rate hikes, the uncertainty surrounding the Russia-Ukraine war, high internal inflation, volatile crude prices and weak quarterly results do not paint an incredibly positive picture.” The recent rate hikes could also slow down economic growth, which is a cause for concern. “Apart from India, other emerging markets, including Taiwan, South Korea and the Philippines, still saw outflows in May.