After making record investments of ₹51,000 crore in August, Foreign Portfolio Investment inflows into the Indian equity market have slowed down to ₹12,000 crore in the first half of September. Analysts said the foreign investors will now watch for the US Fed meeting later this week before renewing inflows into India.
Data showed that FPIs have been net buyers so far in September with an inflow of ₹12,084 crore. They are also net buyers in debt and hybrid markets with an inflow of ₹1,777 crore and ₹268 crore, respectively.
Anticipating the ‘pain’
Stock markets in the US have been in a tailspin ever since Federal Reserve Chairman Jerome Powell gave the most aggressive speech since the operation twist (quantitative easing) era speech of the Fed chairman in 2009. Powell, at the recently held Jackson Hole annual symposium on August 26, pledged not to stop or pause with rate hikes for several months ahead and cautioned of “far greater pain” ahead for the markets.
Foreign investors have so far, continued to invest in Indian equities on the expectation that global central banks, particularly the US Fed, may go slow on rate hikes as inflation starts to cool off. However, the recent CPI data in the US disrupted the trend of cooling inflation, thereby dashing hopes that the US Fed could take a breather after September and ease up on its interest rate hikes. Therefore, on September 16, foreign investors pulled out ₹3,260.05 crore from the equity market — higher than the outflow of ₹1,270.68 crore on September 15, and ₹1,397.51 crore on September 14. According to experts, the the Federal Open Market Committee (FOMC) meeting on September 20-21 will be key to how FPIs view India. Given the US Fed’s hawkish stance, some experts are expecting even a 100 bps rate hike.