Foreign outflows from emerging markets have accelerated since the start of the Russia-Ukraine conflict. Equity outflows in India this year are in stark contrast to the trend of the last two years. Year after year, outflows from India, according to Societe Generale, are the fourth such instance in two decades, the highest ever in terms of amount and rate.
The Society said, “Annual net foreign outflows of $26 billion from Indian equities are close to double those seen during the peak of the global financial crisis in 2009. Even after adjusting for market cap, this is one of the highest outflow rates ever. is one.” General on Thursday in a note on Asia Equity Strategy.
Relentless sales by foreigners have reduced foreign ownership to less than 18%, a more than five-year low. three reasons for FII The exit from India, in the view of Societe Generale, is the first, after a strong rebound, the pace of growth has become very weak. The analyst earnings upgrade to downgrade ratio is close to 1:3, which is a reverse from a year ago.
Second, the depreciation pressure on the Indian rupee has increased significantly due to higher oil prices. Its EM strategy team expects the rupee to depreciate 3% to 80/USD by the end of the year.
Third, and most importantly, stock market of india The global brokerage said it has been relatively slow to correct due to strong domestic inflows partially offsetting foreign outflow pressure.
Meanwhile, according to the report, Indonesia and Thailand have seen modest equity foreign inflows in 2022 as compared to other Asian markets such as India, Korea and Taiwan, which have seen outflows since the beginning of the year. Société Générale said, “foreigners are late in coming to Indonesia, yet there is the highest cumulative influx.”
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Aggressive rate hikes by the US Federal Reserve, coupled with high inflation and high valuations of equities, continued to keep foreign investors away from the Indian stock market as they pulled out. 31,430 crore so far in June. With this, the net outflow of Foreign Portfolio Investors (FPIs) from equities reached 1.98 lakh crore in 2022 so far, the depository data showed.