FPIs Withdraw Rs 5,800 Crore From Indian Equities In November So Far

Before the outflow, FPIs consistently purchased Indian equities in the March to August period this year and poured in Rs 1.74 lakh crore during the six months.

The foreign portfolio investors (FPIs) continued their selling trend as they withdrew more than Rs 5,800 crore from the Indian equities market in the month so far, data from the depositories revealed. This development came amidst surging interest rates and geopolitical tensions in the Middle East. 

Last month, these investors pulled out Rs 24,548 crore worth of equities from the market, while the number for September stood at Rs 14,767 crore, reported PTI. Before the outflow, FPIs consistently purchased Indian equities in the March to August period this year and poured in Rs 1.74 lakh crore during the six months. 

Experts believe that going ahead, this selling trend is unlikely to persist after the US Federal Reserve indicated a dovish stance in its meeting last week. The official data revealed that FPIs dumped shares worth Rs 5,805 crore during the first ten days of November. This selling trend began in September and has continued so far without displaying any signs of reversal. Although the intensity of the withdrawal has reduced this month, analysts noted. 

Explaining this slowdown, Himanshu Srivastava, associate director - manager research at Morningstar Investment Adviser India, said, “This could be largely attributed to the growing geo-political tensions due to the conflict between Israel and Hamas, alongside a notable rise in US Treasury bond yields.”

Market experts further believe that safe-haven assets like gold and the US dollar will be much more popular now. Meanwhile, the debt market saw an inflow of Rs 6,053 crore in the November 1 to 10 period after receiving Rs 6,381 crore in October. 

Srivastava noted that this could be a tactical approach by the foreign investors to distribute funds to Indian debt for the short term, allowing them to redirect capital into the equity markets ‘when conditions become more favourable’. 

V K Vijayakumar, chief investment strategist at Geojit Financial Services, added, “In terms of sectors, FPIs continue selling in financials despite their impressive Q2 results and bright prospects. In this time of uncertainty, FPIs are looking for the safety of the risk-free US bond yields where the 10-year is yielding around 4.64 per cent.”

Experts further highlighted that the addition of Indian government securities in the JP Morgan Government Bond Index Emerging Markets boosted the participation of foreign funds in the Indian bond markets. As such, the overall investment by FPIs in equity touched Rs 90,161 crore and Rs 41,554 crore in the debt market in the year so far. 

“In terms of sectors, FPIs continue selling in financials despite their impressive Q2 results and bright prospects. In this time of uncertainty, FPIs are looking for the safety of the risk-free US bond yields where the 10-year is yielding around 4.64 per cent,” Vijayakumar said.