FPIs Withdraw Over Rs 20,300 Crore From Indian Equities In October So Far, Infuse Rs 6,080 Crore In Debt

The data revealed that the FPIs sold shares worth Rs 20,356 crore this month, as of October 27. This outflow is further expected to broaden by the end of the month.

Sector-wise, FPIs have been selling in sectors such as financials and IT primarily as these two sectors form a majority share of the investors' assets under management (AUM).

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The Foreign Portfolio Investors (FPIs) have withdrawn more than Rs 20,300 crore from Indian equities in October so far, majorly due to a sharp increase in the US treasury yield, and the uncertainties resulting from the Israel-Hamas conflict, official data from the depositories revealed. 

At the same time, the FPIs have infused Rs 6,080 crore into the Indian debt market in the month, reported PTI. Commenting on the factors affecting the flow of FPIs going ahead, Mayank Mehraa, smallcase manager and principal partner, at Craving Alpha, noted that the US Fed’s meeting in November and global economic developments would impact the investor activity.  

Mehraa stated that in the near future, FPIs are expected to remain wary amid global uncertainty and surging US interest rates. However, India’s robust economic growth prospects ‘should maintain its appeal for foreign investors in both equities and debt’, he added.

The data revealed that the FPIs sold shares worth Rs 20,356 crore this month, as of October 27. This outflow is further expected to broaden by the end of the month. Earlier in September, FPIs turned net sellers and withdrew Rs 14,767 crore.

Prior to the outflow, the FPIs were buying Indian equities in the last six months from March to August and purchased equities worth Rs 1.74 lakh crore during the period. 

Himanshu Srivastava, associate director - manager research, at Morningstar Investment Adviser India, said, “Sharp surge in the US treasury yield during the week was the primary reason for FPIs pulling out of the Indian equity markets. The yield on 10-year US treasury bonds crossed the psychological barrier of 5 per cent on Monday for the first time in 16 years.”

The expert added that this development made the investors shift towards safer investment opportunities like the US Treasuries and away from emerging markets such as India. 

Geojit Financial Services’ chief investment strategist, V K Vijayakumar, noted that the Israel-Hamas conflict and volatilities around it have further dampened investor sentiments in the market.

Barat Dhawan, managing partner, Mazars, stated, “Global uncertainty has tripled, with recessionary and inflationary pressures being coupled with the geo-political conflict breaking out in the first week of the month.”

Mehraa added that the September quarterly earnings growth is estimated to be slower than the previous quarter, thus adding to the disappointment of the investors. Experts further believe that these circumstances will lead to an increased focus on safe-haven assets like gold and the US dollar.

Talking about the reasons for the huge inflow in the debt market, Vijayakumar said that this could be due to a multitude of factors like the diversification of investment by the FPIs amidst an environment of uncertainty in the global market and weakness in the global economy. 

Abhishek Banerjee, founder and CEO, Lotusdew Wealth and Investment Advisors, said that the other factor impacting the inflow is the ‘inclusion of Indian government bonds in the JP Morgan Global Bond Index’. 

In the year so far, the overall investment by the FPIs in equity has touched Rs 1 lakh crore and more than Rs 32,500 crore in the debt market. Sector-wise, FPIs have been selling in sectors such as financials and IT primarily as these two sectors form a majority share of the FPI’s assets under management (AUM).