FPIs Dump Indian Equities Worth Over Rs 28,000 Crore In May So Far On Election Outcome Concerns

The investors remained anxious about Indian equities due to uncertainties regarding the election outcome and lucrative valuations of the Chinese markets

During the same period, the investors infused the Indian debt market with Rs 178 crore

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Foreign portfolio investors (FPIs) continued to be anxious about Indian equities in light of the ongoing general elections. The investors dumped equities worth Rs 28,000 crore in the month so far, due to uncertainties regarding the election outcome and lucrative valuations of the Chinese markets. 

Official data with the depositories revealed that as of May 17, the investors withdrew Rs 28,242 crore in equities. However, during the same period, the investors infused the Indian debt market with Rs 178 crore, reported PTI.

The outflow in the equities remained much higher against the pullout of over Rs 8,700 crore in April 2024. Earlier, the investors infused Rs 35,098 crore in March and Rs 1,539 crore in February in the Indian equities.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, noted, “Going forward, there is likely to be a dramatic change in foreign portfolio investors' (FPIs) equity flows in response to election results. Political stability will attract huge inflows in the Indian market.”

Elaborating on the fund flows, Karthick Jonagadla, Smallcase Manager and Founder, Quantace Research, stated, “Following the Lok Sabha elections, FPI inflows into India could strengthen due to three key factors -- potential easing of interest rates by the US Federal Reserve, positive resolutions in global geopolitical tensions and India's increasing weight in the MSCI Emerging Markets Index projected to exceed 20 per cent by mid-2024.”

Sunil Damania, Chief Investment Officer, MojoPMS, explained that FPIs have been offloading in the 2024-24 fiscal year (FY25) due to two reasons. “First, there's uncertainty about the general elections. FPIs generally don't like uncertainty; they prefer to play it safe and lock in the profit they made last year. Second, the market valuations are high,” he stated.

Anirudh Naha, CIO-Alternatives, PGIM India Asset Management, highlighted that the investors are reallocating their funds to China and Hong Kong where the valuations are much more lucrative against Indian stocks. 

“They are moving money from expensive markets like India to cheap markets like Hong Kong.Further, FPIs withdrawal could be attributed to the ongoing geopolitical crisis in the Middle East, relative valuation discomfort, and the strength of US bond yields,” added Vipul Bhowar, Director, Listed Investments, Waterfield Advisors.