FPIs Withdraw Rs 44,396 Crore From Indian Equities In January Amid Weak Earnings And Strong Dollar
The higher valuation of Indian equities, despite recent corrections, coupled with expectations of a weak earnings season and uncertainty over the pace of economic growth, he noted
Foreign investors have withdrawn Rs 44,396 crore from Indian equities this month, influenced by the strengthening dollar, rising US bond yields, and expectations of a weak earnings season. This follows an inflow of Rs 15,446 crore in December, according to data from the depositories. The change in sentiment reflects both global and domestic challenges.
"The continued depreciation in Indian rupee is exerting significant pressure on foreign investors leading them to pull the money out of the Indian equity markets," Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Advisers India, said.
Additionally, the higher valuation of Indian equities, despite recent corrections, coupled with expectations of a weak earnings season and uncertainty over the pace of economic growth, is making investors cautious, he noted.
Data shows that Foreign Portfolio Investors (FPIs) have sold shares worth Rs 44,396 crore from Indian equities so far this month (up to January 17). FPIs have been net sellers on every day this month, except for January 2.
"The principal reasons for the sustained FPIs selling are the strength of the dollar and the rising bond yields in the US. With the dollar index above 109 and the 10-year US bond yield above 4.6 per cent, it is logical for FPIs to sell in emerging markets, particularly in the most expensive emerging market India," V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
With US bond yields offering attractive returns, FPIs have also been net sellers in the debt market. They pulled out Rs 4,848 crore from the debt general limit and Rs 6,176 crore from the debt voluntary retention route.
Vipul Bhowar, Senior Director - Listed Investments at Waterfield Advisors, stated that a cyclical recovery in corporate earnings, coupled with stronger GDP growth driven by resilient domestic consumption and increased government infrastructure spending, could potentially reverse the current trend of FPI outflows into India.
The overall trend reflects a cautious stance from foreign investors, who significantly reduced their investments in Indian equities in 2024, with net inflows of just Rs 427 crore. This marks a stark contrast to the extraordinary Rs 1.71 lakh crore in net inflows seen in 2023, fueled by optimism around India's strong economic fundamentals. In comparison, 2022 witnessed a net outflow of Rs 1.21 lakh crore amid aggressive rate hikes by global central banks.
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