Due to hike in US Fed interest rates, Foreign Portfolio Investors (FFPIs) have withdrawn almost 12,300 crores from the Indian equity market so far in April 2022. FPIs have been net sellers for the last six months from October 2021 to March 2022, pulling out massively 1.48 lakh crore from Indian equities. According to stock market experts, two main reasons for this continuous sell-off of FPIS could be – US Fed’s tough stance on interest rate hike and geopolitical tensions due to Russia-Ukraine war. Apart from equity, FPIs pulled out net 1,282 crore from debt markets in April 2022 as well.
After six months of sales spree, FPI Became a net investor and invested in the first week of April 7,707 crore in equity. After a short breath, once again he turned the net sellers to the tune of Over 4,500 crore during the holiday-shortened week of April 11-13 and the selling continued in the next week as well.
This makes foreign investors a net seller 12,286 crore in the month so far (April 1-22), shows the depository’s data.
Himanshu Srivastava, associate director-manager, research, said, “Anxiety of aggressive rate hike by the US Fed has dented investor sentiments. This has prompted investors to take a cautious approach to their investments in emerging markets like India. could.” Morningstar India said.
Its easy money is being pulled back as central bankers begin to withdraw excess liquidity amid riskier scenarios due to geopolitical tensions, said Manish Jelloka, Co-Head Product and Solutions, Sanctum Wealth.
He further added that rising interest rates in developed markets are usually accompanied by withdrawals from emerging markets.
According to Srivastava, at present there is nothing that can please foreign investors and persuade them to invest in Indian equity markets.
“Apart from an imminent rate hike by the US Fed, uncertainty around the Russia-Ukraine war, high domestic inflation numbers, volatile crude oil prices and weak quarterly results do not paint a very positive picture. In such a scenario, FPIs usually consider the wait. Let us adopt and watch the approach till more clarity emerges,” he said.
Kotak Securities Head-Equity Research (Retail) Shrikant Chauhan said that in view of the adverse conditions in terms of higher crude oil prices, inflation, lower GDP, etc., FPI inflows are expected to remain volatile in the near future.
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