FPIs Turn Cautious, Dump Indian Equities Worth Rs 325 Crore In April So Far

This outflow followed a major investment of Rs 35,000 crore in March and Rs 1,539 crore in February in the equities, official data with depositories revealed

Foreign Portfolio Investors (FPIs) withdrew Rs 325 crore from Indian equities in the first week of April and exhibited cautious behaviour amidst the relatively high valuations and the upcoming general elections. At the same time, the investors continued to remain bullish and infused Rs 1,215 crore in the debt market. 

This outflow followed a major investment of Rs 35,000 crore in March and Rs 1,539 crore in February in the equities, official data with depositories revealed, reported PTI. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The US 10-year yield has spiked to 4.4 per cent, which will impact FPI (foreign portfolio investor) investment flows into India in the near term. However, FPI selling will be limited despite the high US bond yields since the Indian stock market is bullish and has been setting new records consistently.”

Krishna Appala, smallcase manager and senior research analyst, Capitalmind, noted that FPIs could make a comeback after the elections or upon early indications of a rate cut from the US Fed. The official data revealed that the investors withdrew Rs 325 crore from equities in the month, as of April 5. Appala explained, “Relatively high valuations and the looming general elections have made FPIs cautious, leading them to hold back from aggressive investments in the equity markets at this juncture.”

The government securities (G-Sec) 10-year yield remained at 7.1 per cent, while the yield for the US 10-year stood at 4.3 per cent, making it a lucrative destination for the FPIs. This risk-reward ratio could be attributed for the shift in focus for investors from equities to the elevated yields being offered by bond instruments in the US and India.

Sectorwise, the investors turned into major sellers in the FMCG segment and buyers in telecom and realty. The overall inflow for the year so far crossed Rs 10,500 crore in equities and surpassed Rs 57,000 crore in the debt market.