Foreign portfolio investors (FPIs) have pulled out close to ₹4,800 crore from equities in the first fortnight of September on rising US bond yields, a stronger dollar, and concerns over global economic growth.
Before the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and brought in ₹1.74 lakh crore during the period.
“In the coming days, FPIs are likely to press sale as the market is at record highs and valuations are high,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
"With high bond yields in the US (the 10-year is at 4.28 per cent) and the dollar index above 105, FPIs are likely to sell more," he added.
According to the data with the depositories, Foreign Portfolio Investors (FPIs) pulled out a net sum of ₹4,768 crore from the equities so far this month (till September 15). This figure includes bulk deals and investments through the primary market.
This came after FPI investment in equities had hit a four-month low of ₹12,262 crore in August.
"The net outflow (in September) was mainly due to uncertainties surrounding the global interest rate landscape, particularly in the United States, and concerns regarding global economic growth," Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said.
“These concerns stem from broader global macroeconomic factors, including surging crude oil prices and the reemergence of inflation risks,” he said.
He further said that worries about an impending interest rate hike in the United States and its potential impact on the global economy have made investors more cautious, prompting them to adopt a "wait-and-watch" approach.
"While FPI withdrawals in September have raised concerns, it's important to view these movements in the broader context of global financial dynamics. The potential for FPIs to transition into buyers in the coming months is a significant indicator of India's resilience as an investment destination," Mayank Mehraa, small case manager and principal partner at Craving Alpha, said.
“As global conditions evolve and India’s economic fundamentals remain robust, there’s reason to maintain a positive outlook for the markets shortly,” he added.
Investment in debt market
On the other hand, FPIs invested over ₹2,000 crore in the country's debt market during the period under review.
With this, the total investment by FPIs in equity has reached ₹1.3 lakh crore and over ₹30,200 crore in the debt market this year so far.
In terms of sectors, FPIs have been consistently buying capital goods and power.
Even though the foreign investors have been sellers, it didn't impact the market at all since it was neutralised by domestic institutional investors.
“Additionally, hyperactivity by retail investors is also contributing to the bullishness in the market,” Geojit’s Vijayakumar said.