FPIs Continue Sell-Off, Withdraw Rs 8,000 From Indian Equities Market In October

Prior to the outflow, FPIs were consistently buying Indian equities during the last six months from March to August. In the period, FPIs poured in Rs 1.74 lakh crore in the market.

Foreign Portfolio Investors (FPIs) sold Indian equities worth Rs 8,000 crore in the first week of October as the dollar appreciated and US bond yields increased at a steady pace. This development happened after FPIs turned net sellers in September and took out Rs 14,767 crore from the market. 

Prior to the outflow, FPIs were consistently buying Indian equities during the last six months from March to August. In the period, FPIs poured in Rs 1.74 lakh crore in the market, reported PTI. providing an outlook, V K Vijayakumar, chief investment strategist at Geojit Financial Services, noted, “Going ahead, FPIs are unlikely to turn buyers in the market soon in the context of the elevated dollar and US bond yields.”

So far in October, FPIs sold shares worth Rs 8,000 crore, data from the depositories revealed. “India continues to be on top of emerging economies in attracting FPI this year, but September witnessed selling and October has begun with the same trend. The dominant factor impacting capital flows to markets in recent weeks has been the steadily rising US bond yields. The early days of October witnessed a rout in the US bond market, which took the 30-year bond yield to 5 per cent briefly. The benchmark 10-year yield is consistently over 4.7 per cent forcing the FPIs to sell in emerging markets,” Vijayakumar added. 

Himanshu Srivastava, associate director - manager research at Morningstar India, stated that this outflow happened due to the economic uncertainties in the US and Eurozone regions, along with increasing concerns about global economic growth. These developments made foreign investors turn ‘risk-averse’. “Additionally, higher crude prices, sticky inflation numbers and the expectation that the interest rate may continue to remain at elevated levels longer than expected would have prompted foreign investors to adopt a wait-and-watch approach,” he noted. 

Srivastava stated that the deficit monsoon in India and it’s impact on inflation is another matter of concern for the country’s economy, which foreign investors seem to be well aware of. Notably, the dumping by FPIs was countered by the Domestic Institutional Investors' (DII) buying activities. 

Vijayakumar noted, “On the other hand, FPIs invested Rs 2,081 crore in the country's debt market during the period under review. With this, the total investment by FPIs in equity has reached Rs 1.12 lakh crore and over Rs 31,200 crore in the debt market this year so far. In terms of sectors, FPIs have been selling in financials, power, IT, and oil and gas, while they have been buyers in capital goods, autos, and auto components. Further, second quarterly results from financials, which are expected to be good, might restrain FPIs from selling in this segment.”