New Delhi: In the first two weeks of October, foreign investors withdrew almost Rs 7,500 crore from the Indian equities markets due to worries that the US Federal Reserve and other central banks would be tightening monetary policy, which could impede global economic growth, The Business Standard reports.
According to Shrikant Chouhan, Head-Equity Research (Retail) at Kotak Securities, FPI flows are anticipated to remain erratic in the upcoming months as a result of persistent geopolitical risk, high inflation, the expectation of rising government yields, etc.
“The markets were cautious ahead of the release of the US CPI print, which may determine the pace of future rate hikes in the US,” he added.
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The report shows that between October 3 and 14, FPIs withdrew Rs 7,458 crore from stocks.
This followed a withdrawal of over Rs 7,600 crore in September as a result of the US Fed’s aggressive stance and the steep depreciation of the currency.
Prior to this, FPIs made net investments of over 5,000 crore in July and 51,200 crore in August. Prior to July, foreign investors had a nine-month streak of net selling of Indian stocks.
According to Himanshu Srivastava, Associate Director – Manager Research at Morningstar India, the current withdrawal by FPIs was mostly motivated by worries that the US Fed’s and other central banks’ tightening of monetary policy could impede global economic growth.
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“The major trigger for FPI selling is the sustained rise in the dollar and expectations that the dollar will continue to remain strong in the current global macro construct,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
FPI flows have fluctuated over the past few months as a result of their frequent stance changes in response to the rapidly shifting investment environment.
Although there have been brief respites, the general mood has not been favourable.
“Expectation of further and aggressive rate hikes by the US Fed, depreciating rupee, fears of a recession and continuation of conflict between Russia and Ukraine would continue to have a negative impact on foreign flows into Indian equities.This scenario has created an environment of uncertainty leading investors to turn risk averse,” Srivastava said.
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When FPIs sell regularly, a key tendency that Vijayakumar observed, it is in the financial and information technology sectors, which account for the lion’s share of FPI holdings. This trend is still present today.
Additionally, he noted, FPIs have been selling in the oil, gas, and metals sectors because a downturn in the global economy will also affect these markets.
Foreign investors also withdrew Rs 2,079 crore from the debt market during the review period in addition to equity investments.
FPI flows have been negative for the Philippines, Taiwan, and Thailand this month aside from India.
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