FPIs Withdraw Rs 12,000 Crore From Indian Equities In October So Far, Invest Rs 5,700 Crore In Debt Market

The data revealed that foreign portfolio investors offloaded shares worth Rs 12,146 crore this month, as of Oct 20. In Sept, FPIs became net sellers and pulled out Rs 14,767 crore from the market. 

This withdrawal was attributed to a sustained increase in US bond yields and the uncertainties arising from the Israel-Hamas conflict.

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Foreign Portfolio Investors (FPIs) pulled out more than Rs 12,000 crore from Indian equities in October so far, data with the depositories revealed. This withdrawal was attributed to a sustained increase in US bond yields and the uncertainties arising from the Israel-Hamas conflict.

However, the data showed that FPI activity in the Indian debt market stood at more than Rs 5,700 crore in the October month till now, reported PTI. Providing an outlook on the movement of FPIs’ investments in India, Himanshu Srivastava, associate director - manager research at Morningstar Investment Adviser India, said, that these investments ‘will be influenced not only by global inflation and interest rate dynamics but also by the developments and intensity of the Israel-Hamas conflict’.  Srivastava added that geopolitical tensions typically increase risk, which further impacts the foreign capital inflows into emerging markets like India. 

The data with the depositories revealed that foreign portfolio investors (FPIs) offloaded shares worth Rs 12,146 crore this month, as of October 20. This development follows FPIs becoming net sellers last month, when they pulled out Rs 14,767 crore from the market. 

Prior to the outflow, FPIs were consistently buying Indian equities in the last six months, from March to August, and during the period, they bought shares worth Rs 1.74 lakh crore. The latest outflow seems to be a result of the global uncertainties at the moment. 

Mayank Mehraa, smallcase manager and principal partner at Craving Alpha, said, “ Geopolitical issues, particularly the conflicts in Israel and Ukraine, have cast shadows of instability over international markets, prompting FPIs to adopt a cautious stance in the Indian equity arena.”

V K Vijayakumar, chief investment strategist at Geojit Financial Services, also noted, “The primary reason for the sustained selling was the sharp spike in US bond yields, which took the 10-year yield to a 17-year high of 5 per cent on 19th October.” The analyst stated that the at present, safe-haven assets like gold, and the US dollar would be under increased focus. 

Vijayakumar noted that multiple reasons could be responsible for the Rs 5,700 crore inflow in the debt market. “This could be attributed to a host of factors such as FPIs diversifying their investment amidst global uncertainty and weakness in the global economy, Indian bonds are giving good yields and the rupee is expected to be stable given India's stable macros.Another factor is the inclusion of India in the JP Morgan Global Bond Index,” he said. 

These developments could mean investors have opted to wait for conditions to stabilise more and potential corrections to take place before getting back into the market, Mehraa noted. “ In essence, this dual approach of FPIs highlights the intricate dance they perform in response to global events. Their readiness to shift focus from one asset class to another underscores the dynamic nature of investment strategies in the face of changing circumstances,” he added. 

Notably, the total investment by FPIs in equity this year has now touched Rs 1.08 lakh crore and neared almost Rs 35,000 crore in the debt market. Sector-wise, financials, power, FMCG, and IT sectors have reported selling, while sectors like automobiles and capital goods witnessed subdued purchasing. Telecom sector logged buyers.