Foreign Investors Begin New Year In Sell-Off Mode, Pull Out Rs 5,900 Crore From Market In A Week

Foreign investors pulled out nearly Rs5,900 crore from the Indian markets in January first week amid concerns over the re-emergence of Covid in certain countries and fears of recession in the US

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Foreign investors continued with the selling spree and offloaded nearly Rs 5,900 crore from the Indian equity markets in the first week of January amid concerns over the re-emergence of Covid in certain countries and expectations of recession in the US.

Foreign Portfolio Investors (FPIs) have resorted to a cautious stance toward equity markets for the past few weeks.

Here's why FPIs are pulling out of the Indian market

Experts have opined that FPIs flow is expected to remain volatile over various factors including GDP growth concerns.

“Going forward, FPIs flow is expected to remain volatile amid GDP growth concerns, high global interest rates, and muted earnings expectations in the third quarter,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities Ltd told PTI.

According to depositories data, FPIs have withdrawn a net amount of Rs 5,872 crore from the Indian equity markets during January 2-6, reported news agency PTI.

Foreign investors have continued selling for 11 consecutive days taking the cumulative selling to Rs 14,300 crore. This came following a net inflow of Rs11,119 crore in December and ₹36,239 crore in November.

In 2022, FPIs pulled out almost Rs 1.21 lakh crore from the Indian equity markets over an aggressive rate hike by the central banks globally, particularly the US Federal Reserve, volatile crude, rising commodity prices along with Russia and Ukraine conflict. It ended as the worst year for FPIs in terms of flow as withdrawal from equities comes amid a net investment in the preceding three years.

Experts cited the reasons behind the latest outflow in January as the dismal cues emanating from both global, as well as domestic quarters. "Increasing concerns over re-emergence of Covid in some parts of the world and recession worries in the US have been keeping FPIs away from emerging markets like India," Himanshu Srivastava, Associate Director - Manager Research at Morningstar India told the agency.

Others cited that many investors may have chosen to book profits with Indian markets touching all-time highs in the recent past. "The money taken out from India is being invested in the underperformers of last year like China and Europe, which are doing well now. Clearly, FPI money is chasing lower valuations by selling in overvalued markets like India," noted VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

If the FPI selling continues, it will open up opportunities for investors. FPIs will sell in stocks in which they are sitting on profits, like the banking segment, he said.

Considering last year, too, selling by FPIs in banks offered opportunities to domestic investors. In addition to equities, FPIs have offloaded debt securities to the tune of ₹1,240 crore during the first week of January.

Apart from India, FPI flows were negative for Taiwan and Indonesia so far this month, while it was positive for the Philippines, South Korea, and Thailand.