Looking at the policy normalization narrative by US Fed And other major central banks, with higher oil prices and a volatile rupee, FPIs are likely to stay away from emerging market assets, Hitesh Jain, Lead Analyst – Institutional Equities, Yes Securities, said.
He said FPI inflows will resume only when there is visibility on the peak of bond yields in the US and the end of Fed rate hikes.
Besides, if the current trend of rising dollar and bond yields persist, FPIs are likely to sell more, said VK Vijayakumar, chief investment strategist.
According to the data, foreign investors made a net withdrawal of Rs 45,841 crore from equities in June (till 24th).
The massive selling by FPIs continued in June as they have been continuously pulling money out of Indian equities since October 2021.
“The reserve Bank of IndiaTightening of monetary policy and rise in global commodity prices has mainly bled domestic markets in the form of substantial cash outflows from equity markets during the last few months,” said Manoj Purohit, Partner & Leader – Financial Services Tax, BDO. India said.
Such withdrawal speeds were last seen when the pandemic escalated in the first quarter of 2020.
Purohit said the ongoing military conflict between Ukraine and Russia globally, rising food rates and the return of the pandemic have added to the fire.
Vijayakumar of Geojit Financial Services said rising dollar and appreciation of bond yields are the key factors in the US. FPI outflow.
Another important factor that has contributed to the outflow from the domestic stock markets is its valuation, which, despite the recent correction, remains at a premium to other related markets, Himanshu said. SrivastavaAssociate Director – Manager Research, Morningstar IndiaTold.
This has resulted in foreign investors booking profits here and shifting their focus to other markets, which are attractive on the valuation and risk-reward front, he said.
Interestingly, the bulk of FPI sales are in performing sectors such as IT and financial and domestic institutional investors (DIIs), who are absorbing this liquidity.
On the other hand, FPIs invested a net amount of about Rs 926 crore in the debt market during the period under review.
Srivastava said that from a short-term perspective, in view of the ongoing uncertainties, parking investments of FPIs can largely be attributed to net inflows.
Broadly speaking, from a risk-reward standpoint and with interest rates rising in the US, Indian debt does not appear to be an attractive investment option for foreign investors, he said.
Purohit of BDO India believes that this short-term momentum of negative volatility is likely to slow down in the coming weeks if not reversed completely.
“India is still in a better position than other global markets, mainly due to consistent growth pattern, better GDP numbers, recovery of forex reserves, consistent demand from consumers and good financial numbers by large corporates,” he said. They said.
Apart from India, FPIs are selling heavily in other emerging markets like Taiwan, South Korea, Philippines, Indonesia and Thailand. PTI SP Bal Bali