The latest outflow was triggered by the unwinding of the yen carry trade after the Bank of Japan raised interest rates to 0.25% and recession fears in the US. File.
| Photo Credit: Reuters

After infusing money during the last two months, foreign investors have turned net sellers as they pulled out over ₹13,400 crore from Indian equities in August so far due to unwinding of the yen carry trade and recession fears in the US.

So far this year, FPIs have made a net investment of ₹22,134 crore in equities, data with the depositories showed.

Going forward, if the market continues to rise, FPIs are likely to press more sales since Indian stock valuations continue to remain elevated, particularly in relation to valuations in other markets, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

According to the data, Foreign Portfolio Investors (FPIs) withdrew a net amount of ₹13,431 crore from equities so far this month (August 1-9).

This came following an inflow of ₹32,365 crore in July on expectation of sustained economic growth, continued reforms and better-than-expected earnings season, and ₹26,565 crore in June driven by political stability and the sharp rebound in markets.

Before that, FPIs withdrew ₹25,586 crore in May on poll jitters and over ₹8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields.

The latest outflow was triggered by the unwinding of the yen carry trade after the Bank of Japan raised interest rates to 0.25% and recession fears in the US, Vijayakumar said.

This was further exacerbated by escalating geopolitical tensions, particularly the intensifying conflict between Israel and Iran, which led investors to reduce their risk exposure, Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said.

Additionally, the higher valuation of Indian markets provided foreign investors with an attractive profit-taking opportunity.

Meanwhile, factors such as growing recession fears in the U/S., driven by weak jobs data, and uncertainty surrounding the timing of interest rate cuts led to the outflow from Indian equities, Srivastava added.

For the fortnight ended July 31, FPIs were sustained sellers in financial services. However, they were buyers in IT, autos, capital goods and metals during the period under review.

On the other hand, FPIs invested ₹6,261 crore in the debt market in August so far. This has taken the tally to ₹97,249 crore so far in 2024.

FPIs also invested ₹14,955 crore in the debt market in June. 
| Photo Credit: PTI

After two months of net outflow, foreign investors turned buyers in June, infusing ₹26,565 crore in Indian equities, driven by political stability and a sharp rebound in markets.

“Looking ahead, attention will gradually shift towards the Budget and Q1 FY25 earnings, which could determine the sustainability of FPI flows,” Vipul Bhowar, director, Listed Investments, Waterfield Advisors, said.

According to the data with the depositories, Foreign Portfolio Investors (FPIs) have made a net infusion of ₹26,565 crore in equities this month.

This came following a net outflow of ₹25,586 crore in May on poll jitters and more than ₹8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in U.S. bond yields.

Before that, FPIs made a net investment of ₹35,098 crore in March and ₹1,539 crore in February, while they took out ₹25,743 crore in January. The net outflow now stood at ₹3,200 crore in the month, data with the depositories showed.

Geojit Financial Services Chief Investment Strategist V. K. Vijayakumar said political stability, despite the BJP not getting a majority on its own, and the sharp rebound in markets aided by steady domestic institutional investors (DIIs) buying and aggressive retail buying, has forced the FPIs to turn buyers in India.

“However, the FPI buying has been focussed on a few specific stocks rather than being widespread across the market or sectors. This is because Indian equities are still considered overvalued by FPIs,” Mr. Bhowar said.

They are favouring the financial, auto, capital goods, real estate, and select consumer sectors.

“With government stability assured, impressive GDP performance and forecasts, stable consumer price index, ample forex reserves and robust banking sector health, I anticipate a steady and substantial FPI inflow,” Kislay Upadhyay, smallcase Manager & Founder Fidelfolio, said.

Additionally, FPIs invested ₹14,955 crore in the debt market in June. With this, FPIs’ investment in the debt market reached ₹68,624 crore in 2024 so far. India’s inclusion in the JP Morgan Bond Index is positive.

In the long term, this will reduce the cost of borrowing for the government and the cost of capital for corporates. This is positive for the economy and therefore, for the equity and debt market.

Image used for representational purposes only.
| Photo Credit: The Hindu

Foreign investors have pulled out a massive ₹22,000 crore from Indian equities so far this month, due to uncertainty surrounding the outcome of the Lok Sabha elections and outperformance of Chinese markets.

This came following a net outflow of over ₹8,700 crore in the entire April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in U.S. bond yields. Before that, FPIs made a net investment of ₹35,098 crore in March and ₹1,539 crore in February.

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, V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

According to data with depositories, Foreign Portfolio Investors (FPIs) witnessed a net outflow of ₹22,047 crore from equities this month (till May 24).

“This heavy selling was triggered by the massive outperformance of Chinese stocks. The Hang Seng index, dominated by Chinese stocks (FPIs invest through the Hong Kong market since there are restrictions on investing through the Shanghai market) surged 7.66% during the last month,” Mr. Vijayakumar, 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, Himanshu Srivastava, Associate Director — Manager Research, Morningstar Investment Research India, said.

“In recent times, the U.S. Fed has indicated that it would not go ahead with rate cuts until inflation cools and consistently moves towards the target range. This has raised scepticism over the possibility of an early rate cut.

“It led to the appreciation in the U.S. Dollar leading to a surge in U.S. Treasury yields. 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 U.S. Dollar and U.S. Treasuries,” he added.

On the other hand, FPIs invested ₹2,009 crore in the debt market during the period under review.

Before this outflow, foreign investors put in ₹13,602 crore in March, ₹22,419 crore in February, ₹19,836 crore in January. This inflow was driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index.

“The long-term outlook for FPI flows into Indian debt is positive due to India’s inclusion in global bond indices. However, near-term flows are being impacted by global macroeconomic uncertainty and volatility. The trend will reverse once the interest rate outlook becomes clearer,” Vipul Bhowar, Director, Listed Investments at Waterfield Advisors, said.

JP Morgan Chase & Co. in September last year announced it will add Indian government bonds to its benchmark emerging market index from June 2024. This landmark inclusion is anticipated to benefit India by attracting around $20-40 billion in the subsequent 18 to 24 months.

Overall, FPIs have withdrawn a net amount of ₹19,824 crore in equities in 2024 so far, however, invested ₹46,917 crore in debt market.

Image used for representational purpose only.
| Photo Credit: The Hindu

Foreign investors pulled out a massive ₹17,000 crore from Indian equities in the first 10 days of the month owing to general election and the uncertainty surrounding its outcome coupled with expensive valuations and profit booking.

This was way higher than a net withdrawal of ₹8,700 crore in the entire April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in U.S. bond yields.

Before that, FPIs made a net investment of ₹35,098 crore in March and ₹1,539 crore in February. Looking ahead, post-general elections, corporate India’s strong financial performance in Q4 FY24 is anticipated to be rewarded.

While FPIs may adopt a cautious stance until the election results are clear, favourable outcomes and established political stability could see their return in significant numbers, Trivesh D., COO at Tradejini, said.

According to the data with the depositories, Foreign Portfolio Investors (FPIs) experienced a net outflow of ₹17,083 crore in equities this month (till May 10).

There are multiple reasons behind this aggressive selling by FPIs. With the ongoing general election and the uncertainty surrounding its outcome, investors are wary to enter the markets before the election results, Himanshu Srivastava, associate director – manager research, Morningstar Investment Research India, said.

Also, with Indian markets trading at relatively high valuations, many investors would have found this as an opportunity to book profit and wait until more clarity emerges on the country’s political landscape, he added.

“Given the current political uncertainty in India and with US interest rates still appealing, FPIs have shifted to a risk-off mode,” Krishna Appala, smallcase manager & senior research analyst at Capitalmind, said.

Another reason could be profit booking by FPIs in anticipation of a market correction, particularly around results day, Tradejini’s Mr. Trivesh said.

On the global front, the U.S. Fed has indicated no rate cuts until inflation cools, thus raising scepticism over the possibility of an early rate cut. It led to the appreciation in U.S. dollar leading to a surge in U.S. Treasury yields.

On the other hand, FPIs withdrew ₹1,602 crore from the debt market during the period under review.

Before this outflow, foreign investors injected ₹13,602 crore in March, ₹22,419 crore in February, ₹19,836 crore in January. This inflow was driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index.

JP Morgan Chase & Co in September last year announced it will add Indian government bonds to its benchmark emerging market index from June 2024.

This landmark inclusion is anticipated to benefit India by attracting around $20-40 billion in the subsequent 18 to 24 months.

FPIs have turned sustained sellers and domestic institutional investors (DIIs) have turned sustained buyers in all trading days of this month, so far, with cumulative DII buying of ₹19,410 crore, V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, said.

Overall, FPIs withdrew a net amount of ₹14,860 crore in equities in 2024 so far. They, however, invested ₹14,307 crore in debt market.

Equity benchmark indices declined in early trade on Monday September 25, 2023 ,amid a weak trend in global markets and continuous foreign fund outflows.

The 30-share BSE Sensex fell 136.61 points to 65,872.54. The Nifty dipped 39.7 points to 19,634.55.

Among the Sensex firms, Larsen & Toubro, Axis Bank, ITC, Infosys, Tata Consultancy Services, Reliance Industries, Hindustan Unilever and IndusInd Bank were the major laggards.

Bajaj Finance, Bajaj Finserv, Maruti and Asian Paints were the gainers.

In Asian markets, Seoul, Shanghai and Hong Kong were quoting in the negative territory while Tokyo traded in the green.

The US markets ended lower on Friday.

Global oil benchmark Brent crude climbed 0.21 per cent to USD 93.47 a barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹1,326.74 crore on Friday, according to exchange data.

Foreign Portfolio Investors (FPIs) have pulled out over ₹10,000 crore from Indian equities in the first three weeks of September.

“Sustained FII selling has been a drag on the market in recent days,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The BSE benchmark had declined 221.09 points or 0.33 per cent to settle at 66,009.15 on Friday. The Nifty fell 68.10 points or 0.34 per cent to end at 19,674.25.