FPIs remain in selling mode; Withdraws Rs 7,400 crore from equity in July so far

Foreign investors have continued to remain cautious on the Indian equity market amid continued strengthening of the dollar and rising concerns about a slowdown in the US and have pulled out over Rs 7,400 crore so far this month. This comes after a net withdrawal of Rs 50,203 crore from equity in June. Himanshu Srivastava, Associate Director- Manager Research, Morningstar India, said though foreign portfolio investors (FPIs) have slowed their selling momentum, it does not indicate a change in trend as there was no significant improvement in the underlying drivers. Is.

There has been an exodus of foreign funds from the Indian equity market in the last nine months. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “Given the uncertainty in the forex market and the continued strength of the dollar, FPIs are unlikely to become aggressive buyers in the Indian market and at higher levels they may turn sellers again. “

Going forward, geopolitical risks, rising inflation and tightening of monetary policy by central banks will keep FPI inflows into emerging markets volatile, said Shrikant Chauhan, head-equity research (retail), Kotak Securities. According to depository data, FPIs pulled out a net amount of Rs 7,432 crore from Indian equities during July 1-15. Srivastava said there have been sporadic net inflows by FPIs in the past week, but the broader trend remains cautious.

FPIs pulled out a net Rs 50,203 crore from equities in June. This was the highest net outflow since March 2020, when they pulled out Rs 61,973 crore. With the fresh outflows, the net outflow from equities by FPIs so far this year has reached around Rs 2.25 lakh crore – a record high. Before that, he pulled out Rs 52,987 crore for the entire 2008, the data showed.

According to Chouhan, weakness was witnessed in Indian equities as global inflation print remained high, US slowdown concerns mounted, dollar index continued its bullish rally and Q1 results of large IT companies were weaker than expected. Tradesmart chairman Vijay Singhania said the rupee touched the psychologically important 80 per dollar mark during the week, giving the RBI trouble in controlling the currency. Most central bankers are struggling in this currency war which is a collateral damage of the war in Europe, where the euro is now at par with the dollar, suggesting that the euro area is looking at a deeper recession than the US, he said. . Singhania said that it is not surprising to withdraw money from foreign investors in such circumstances. According to Vijayakumar, a positive development from the Indian market perspective is the strength of the retail investor segment.

Retail investors – both directly and through domestic institutional investors (DIIs) – are absorbing FPI sales, thereby preventing a market crash. The sale of FPIs has driven down the prices of high quality finance, especially leading banks. He said this is a good opportunity for long-term investors to invest for more than three years.

Apart from equity, FPIs pulled out a total of Rs 879 crore from the debt market during the period under review. Srivastava said that from a risk-reward standpoint and with interest rates rising in the US, Indian debt does not appear to be an attractive option for foreign investors. He said there has been intermittent weekly net inflows, but the main reason for this can be attributed to FPI parking investments from a short-term perspective in view of the ongoing uncertainties.

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