FPIs Maintain A Bearish Outlook On Indian Equities In August, See What Led To This

The investors withdrew Rs 21,201 crore from Indian equities, as of August 17, 2024, while the inflow in Indian debt market touched Rs 9,112 crore

Foreign portfolio investors (FPIs) continued to dump Indian equities in August as recession fears in the US increased and geopolitical tensions escalated. The investors maintained their bearish outlook and withdrew Rs 21,201 crore from Indian equities, as of August 17, 2024. Official data from the depositories revealed that during the month so far, the investors poured in Rs 9,112 crore in the Indian debt market.

This withdrawal from equities was attributed to the unwinding of the yen carry trade, fears in the US economy, and the geopolitical situations, reported PTI. Earlier in July, the investors maintained an inflow of Rs 32,365 crore, while in June, the inflow touched Rs 26,565 crore.

This inflow was backed by expectations of continued economic growth, consistent reform measures, and an earnings season that fared ahead of market anticipation. In the year so far, the investors have poured in Rs 14,364 crore in Indian equities, while the debt market has received Rs 1 lakh crore so far.

Vipul Bhowar, Director of Listed Investments, Waterfield Advisors, noted, “FPI outflows witnessed in August were mainly driven by a combination of global and domestic factors.Globally, concerns about the unwinding of the Yen carry trade, potential global recession, slowing economic growth, and ongoing geopolitical conflicts led to market volatility and risk aversion.”

Bhowar explained that the outflow followed the Bank of Japan announcing a hike in interest rates to 0.25 per cent. The analyst explained that after buying in June and July, investors might have preferred to book profits following a strong rally in the recent quarters.

Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, added that the hike in capital gains tax introduced in the recent Budget resulted in the selling spree by the investors. “FPIs have been cautious due to the high valuations of Indian stocks, coupled with global economic concerns like rising recession fears in the US amid weak jobs data, uncertainty over the timing of interest rate cuts, and the unwinding of yen carry trade,” Srivastava noted.