FPIs Dump Indian Equities Worth Over Rs 22,000 Crore In May So Far On Election Outcome Uncertainty

As of May 24 in the month, the investors dumped Indian equities worth Rs 22,047 crore, while in the Indian debt market, the investors infused Rs 2,009 crore in the same period

Foreign investors continued to be bearish towards Indian equities and withdrew Rs 22,000 crore from the segment in the month so far, amidst uncertainty regarding the outcome of the current Lok Sabha elections. As of May 24 in the month, the investors dumped Indian equities worth Rs 22,047 crore, while in the Indian debt market, the investors infused Rs 2,009 crore in the same period. 

This outflow from equities followed a net outflow of Rs 8,700 crore in April, and an inflow of Rs 35,098 crore in March, reported PTI. The selling was also triggered by the outperformance of the Chinese markets. 

Commenting on the fund flows, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, noted, “Going forward, as clarity emerges on the election front, Foreign Portfolio Investors (FPIs) are likely to buy in India, since they cannot afford to miss the post-election results rally. Actually, the rally may begin even before the election results.” He added that the Hang Seng index also climbed 7.66 per cent during the last month. The index is majorly dominated by Chinese shares. 

Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said, “The election-related jitters, too, might have influenced FPI selling. With the on-going general election in the country and the uncertainty surrounding its outcome, foreign investors at this point are wary to enter the Indian equity markets before the announcement of election results.”

Recently, the US Fed also indicated that it doesn’t plan to do any rate cuts till inflation eases and starts moving towards the target range, Srivastava pointed out. This has raised doubts regarding the possibility of an early rate cut, in turn, leading to an appreciation in the US dollar and a surge in the US Treasury yields, he noted.

"This doesn't augur well for the emerging markets like India, as under such scenario investments also tend to shift from riskier assets like emerging market equities to more safer asset classes such as US Dollar and US Treasuries,” he stated.