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Foreign portfolio investment (FPI) in Indian equities was valued at $542 billion in the March quarter of 2023, a decline of 11% over the previous year, mainly due to outflow of foreign funds from the domestic market, according to a report. morning Star Report. In comparison, FPI inflows into Indian equities in the January-March quarter of 2022 stood at $612 billion.
On a quarter-on-quarter basis, FPI inflows in Indian equities fell 7% to $584 billion in the three months ending December 2022.
This comes after their investments increased in value for three consecutive quarters. FPI contribution to Indian equity market capitalization declined to 17.3% during the year under review from 17.8% as of March 2022.
After pulling out a record amount in 2021-22, foreign portfolio investors continued their selling spree in the last fiscal as well, pulling out ₹37,631 crore from Indian equities amid aggressive rate hikes by central banks globally.
Read also: In January, FPI recorded the highest withdrawal of ₹ 28,852 crore in 7 months
Since the inception of foreign investment in 1993, this is the first time that foreign portfolio investors (FPIs) have sold for two consecutive financial years.
They sold equities worth Rs 1.4 lakh crore in FY22 and the pace of sales slowed down to Rs 37,632 crore in FY23, the depository data showed.
Prior to these withdrawals, FPIs had invested a record Rs 2.7 lakh crore in equities in 2020-21 and Rs 6,152 crore in 2019-20.
In the financial year 2022-23, most major central banks started raising interest rates, resulting in outflow of hot money from emerging markets including India.
This resulted in an unprecedented rise in prices (inflation) in most economies. In addition to global monetary tightening, volatility in crude oil, along with rising commodity prices Russia and Ukraine conflict There was an exodus of foreign exchange in 2022-23.
The scenario on the domestic front was also not encouraging. Rising inflation continues to be a cause of concern, and to counter that, the RBI also hiked rates, which casts a shadow over the growth prospects of the domestic economy, said Himanshu Srivastava, Associate Director-Manager Research. morning StarIndia.
He added that another important factor that led to the outflow from domestic stock markets was its high valuation compared to other related markets.
As a result, foreign investors booked profits and shifted their focus to other markets which were attractive on valuation and risk-reward front. Apart from equities, FPIs pulled out Rs 8,938 crore from debt markets in the period under review after putting in Rs 1,628 crore in 2021-22.