“Foreign Portfolio Investors Exit Indian Market with INR 14,767 Crore Withdrawal in September”
After six months of sustained investment, Foreign Portfolio Investors have turned net sellers in the Indian market due to factors like dollar appreciation, rising US bond yields, and higher oil prices. The outlook for FPI flows remains uncertain, contingent on the Indian economy’s performance, the RBI’s October monetary policy, and September quarter earnings results.
Foreign Portfolio Investors (FPIs) have made a notable shift in their investment stance, transitioning from buyers to net sellers in the Indian equity market. In the month of September alone, FPIs withdrew a substantial INR 14,767 crore. This significant reversal in investment trends has been attributed to a confluence of factors, including the strengthening of the US dollar, an upward trajectory in US bond yields, and the surge in global crude oil prices.
Over the past six months, FPIs had consistently shown interest in Indian equities, with investments totaling INR 1.74 lakh crore from March to August. However, their recent withdrawal suggests a reevaluation of market dynamics. Market experts are now closely monitoring several key factors that will influence FPI flows in the coming months.
Mayank Mehra, Manager and Principal Partner at Craving Alpha, commented on the uncertain outlook for FPI investments. He noted that FPI behavior would depend on the performance of the Indian economy, the Reserve Bank of India’s (RBI) October monetary policy decisions, and the outcome of corporate earnings for the September quarter.
The recent outflow of funds came on the heels of FPI investments reaching a four-month low of INR 12,262 crore in August. The driving forces behind FPI’s retreat from the Indian market include the appreciation of the US dollar, which pushed the dollar index close to 107, and the steady climb of US 10-year bond yields, reaching approximately 4.7 percent. Additionally, the surge in Brent crude oil prices to USD 97 weighed on FPI sentiment.
Himanshu Srivastava, Associate Director – Manager Research at Morningstar India, pointed to economic uncertainties in the US and Eurozone regions, coupled with concerns about global economic growth, as influencing FPIs’ risk-averse behavior. Higher crude prices, persistent inflation figures, and the anticipation of prolonged elevated interest rates have likely prompted foreign investors to adopt a cautious “wait-and-see” approach.
Furthermore, concerns about India’s sub-normal monsoon and its potential impact on inflation are on the radar of foreign investors. In response to FPI selling, domestic institutional investors (DIIs) have stepped up their buying activity.
It’s worth noting that FPIs made investments totaling INR 938 crore in India’s debt market during the same period, reinforcing their diverse portfolio approach. Consequently, FPIs have invested INR 1.2 lakh crore in Indian equities and over INR 29,000 crore in the debt market so far this year.
In terms of sectors, FPIs exhibited buying interest in capital goods and selected financials, highlighting their discerning approach to the Indian market amidst changing global economic dynamics. As FPI behavior remains closely watched, the future direction of their investments hinges on a complex interplay of domestic and international factors, adding an element of uncertainty to India’s financial landscape.
Sources By Agencies
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