Exodus of overseas cash from the Indian fairness markets continues unabated with FPIs pulling out over Rs 35,000 crore thus far this month on considerations over the prospects of extra aggressive fee hike by US Fed and appreciation of the greenback.
With this, web outflow by Foreign Portfolio Investors (FPIs) from equities reached Rs 1.63 lakh crore thus far in 2022.
Going forward, FPIs circulation in India is to stay risky within the close to time period, given the headwinds by way of elevated crude costs, inflation, tight financial coverage, amongst others, mentioned Shrikant Chouhan, Head – Equity Research (Retail), Kotak Securities.
“Since the mother market, US, is weak and dollar is strengthening, FPIs are likely to continue selling in the near term,” V Ok Vijayakumar, Cheif Investment Strategist at Geojit Financial Services, mentioned.
Foreign traders remained web sellers for seven months to April 2022, withdrawing a large web quantity of over Rs 1.65 lakh crore from equities.
After six months of promoting spree, FPIs turned web traders within the first week of April attributable to correction within the markets and invested Rs 7,707 crore in equities.
However, after a brief breather, as soon as once more they turned web sellers in the course of the holiday-shortened April 11-13 week, and the sell-off continued within the succeeding weeks as effectively.
FPI flows proceed to stay unfavorable within the month of May until date and have dumped equities value Rs 35,137 crore throughout May 2-20, information with depositories confirmed.
“The major factor behind the relentless FPI selling is the appreciation of the dollar which has taken the dollar index above 103. Also, India is the major emerging market where FPIs are siting on big profits and the market is very liquid to absorb FPI selling,” Vijayakumar mentioned.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, mentioned that overseas traders proceed to have considerations over the prospects of extra aggressive fee hike by US Fed going forward.
US Fed has hiked charges twice this 12 months to battle surging inflation attributable to the disruption in provide chain because of the warfare between Russia and Ukraine.
“Because of the war, the geopolitical tension has also enhanced, which has prompted investors to turn risk-averse and stay away from emerging markets like India which are perceived to be relatively riskier. And in the current risk-averse environment, foreign investors would have found profit booking a better option,” Srivastava mentioned.
On the home entrance too, considerations over surging inflation in addition to additional fee hikes by the RBI and its influence on the financial development loomed massive.
“What spooked investors was the impact of inflation on the sharp and sudden drop in retail sales,” Vijay Singhania, Chairman, TradeSmart, mentioned.
Apart from equities, FPIs withdrew a web quantity of Rs 6,133 crore from the debt market in the course of the interval beneath overview.
With central banks struggling to regulate inflation, excessive volatility will proceed to be a part of the routine, Singhania mentioned.
Apart from India, different rising markets, together with Taiwan, South Korea, Indonesia and the Philippines, witnessed outflow in May until date.