This month, foreign investors withdrew around 6,000 crores from Indian equity markets as the US dollar rose against the rupee. According to depositories, the cumulative outflow of FPIs in 2022 has reached 1.75 lakh crore.
According to Shrikant Chouhan, Head-Equity Research (Retail) at Kotak Securities, FPI flows are expected to remain volatile in the coming months due to ongoing geopolitical risk, elevated inflation, and an expectation of rising treasury yields, as reported by PTI.
“FPIs are unlikely to be popular in the near future. They will, however, only become persistent buyers if the dollar begins to plummet. This, in turn, will be influenced by the pace of inflation in the United States and the Federal Reserve’s monetary policy “VK Vijayakumar, the Chief Investment Strategist at Geojit Financial Services, said PTI.
The Geojit strategist claimed that in the future, “With the dollar index above 111 and the US 10-year bond yield at 3.7%, FPIs are unlikely to buy actively in the near future. The scenario will shift if the dollar index and US bond yields decline. In September, FPIs were large buyers of financials, automobiles, and capital goods, and sellers of IT. If FPIs start buying again, financials will come out on top because they have good underlying support.”
According to statistics, FPIs withdrew Rs 5,992 crore from stocks in October (till 21). However, FPIs’ sales have dropped dramatically in recent days. A noteworthy market trend has been ongoing buying by domestic institutional investors (DIIs) and individual investors, which has exceeded selling by foreign institutional investors (FPIs).
“FPIs will have to pay much more to repurchase the stocks they sold. This knowledge is postponing their selling even in a bad macro environment when US bond yields are rising and the currency is weakening “Vijayakumar continued.
This month’s withdrawals follow an outflow of over 7,600 crores in September as a result of the US Federal Reserve’s hawkish stance and the rupee’s rapid devaluation.
About FPI
Previously, FPIs made a net investment of 51,200 crores in August and almost 5,000 crores in July. According to PTI, foreign investors had been net sellers of Indian stocks for nine months in a row prior to July. However, with fears about the global economic slowdown weighing on market sentiment, it would be interesting to see how FPIs behave in the equity market in the coming months.
According to Himanshu Srivastava, Associate Director – Manager Research at Morningstar India, the recent migration of FPIs is primarily motivated by concerns about monetary policy tightening by the US Federal Reserve and other central banks around the world, which could hinder global economic growth.
A Foreign Portfolio Investment (FPI) is a collection of assets such as stocks, bonds, and cash equivalents. Portfolio investments are either owned by the investor directly or managed by financial professionals. In economics, foreign portfolio investment refers to the entry of funds into a country in which foreigners deposit money in a country’s bank or acquire securities in the country’s stock and bond markets, sometimes for speculation.
The majority of foreign portfolio investments are comprised of securities and other foreign financial assets that the foreign investor holds passively. This does not provide the foreign investor actual ownership of the financial assets, but it may be relatively liquid depending on market volatility.
Overseas portfolio investments can be made by individuals, businesses, and even governments in foreign countries. Individuals can diversify their portfolios while gaining an international advantage through this type of investing.
Foreign portfolio investment is recorded in the capital account of a country. It is also included in the balance of payments, which measures the amount of money flowing into and out of a country over a given period of time.
Continue to read more latest news
201 total views, 2 views today