FPIs Dump Indian Equities Worth Rs 25,586 Crore In May, Remain Bullish On Debt Market

During the same period, the investors poured in Rs 8,761 crore in the Indian debt market and Rs 4,283 crore via debt-VRR (Voluntary Retention Route), official data from the depositories revealed

Foreign Portfolio Investors continued to withdraw equities worth Rs 25,586 crore from Indian equities in May amidst the uncertainty surrounding the general elections outcome and the outperformance of the Chinese markets. During the same period, the investors poured in Rs 8,761 crore in the Indian debt market and Rs 4,283 crore via debt-VRR (Voluntary Retention Route), official data from the depositories revealed.

This outflow from equities followed investors pulling out more than Rs 8,700 crore in April, while the investors infused Rs 35,098 crore in March and Rs 1,539 crore in February, official data revealed, reported PTI. 

Elaborating on the fund flows, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, noted, “Going ahead, election results, which will be out on June 4, could determine FPIs flows into Indian equities in the near future. In the medium term, US interest rates will exert more influence on FPI flows.”

Vijayakumar pointed out that FPI selling has been majorly triggered by the outperformance of the Chinese stocks. The Hang Seng index surged 8 per cent in the first half of May, leading to selling in India and buying in Chinese stocks, he stated.

Vipul Bhowar, Director of Listed Investments, Waterfield Advisors, stated, “The relatively high valuations and weak earnings, particularly in the financial and IT sectors where FPIs have a high allocation, along with political uncertainties such as ambiguity around the outcome of elections, global risk-off sentiment, and the appeal of Chinese markets, have led to FPI selling.”

Explaining the fund outflow, Vijayakumar added, “Another reason was the spike in US bond yields. Whenever the US 10-year bond yields rose above 4.5 per cent, FPIs sold in emerging markets like India and moved money to bonds. These two factors triggered the selling in equity in India.”

A strong GDP growth, manageable inflation, and political stability can also contribute to creating a positive outlook for the Indian economy, pointed out Kislay Upadhyay, Smallcase Manager and Founder, FidelFolio. 

“Q4FY24 GDP growth came in at 7.8 per cent surpassing the 6.7 per cent expectation, while the full-year FY24 growth stood at 8.2 per cent. Additionally, the record dividend of Rs 2.1 lakh crore from the RBI has provided further fiscal room for the government to continue focus on infra spending. These factors suggest that monthly FPI inflows could exceed a sustained Rs 30,000 crore (in this month) if the current government remains in power,” Upadhyay stated.