FPIs withdrew ₹35,506 crore in February

Foreign investors have been pulling money out of Indian markets since October last year, but the volume of outflows this month is the highest since March 2021 when they took it. 1,18,203 crores.

The selling was triggered by a number of factors, including the Fed’s decision and the war between Russia and Ukraine.

Speaking to PTI, Himanshu Srivastava, Associate Director (Manager Research), Morningstar India, said the pace of outflows has picked up sharply following the US Fed’s decision to ease stimulus measures and raise interest rates at the earliest.

“Amid tensions between Russia and Ukraine and fears of a large-scale war between the two countries, foreign investors have taken a cautious approach and started shying away from investing in emerging markets such as India,” he said.

Now, with Russia’s invasion of Ukraine, geopolitical tensions of such magnitude do not bode well for emerging markets such as India with respect to foreign inflows as such markets are considered riskier investment destinations and compared to developed markets. The potential for geopolitical upheaval is high. added.

During February 1-25, FPIs pulled out 31,158 crore from equity, 4,467 crore from the loan segment. However, in the pump 120 crore in hybrid devices during the same time.

It is difficult to predict how the Ukraine crisis will unfold, said VK Vijayakumar, chief investment strategist at Geojit Financial Services. If the conflict continues for some time, the consequences for the global economy will be dire.

“Crude oil at US$104 a barrel will be bad for Indian macros. The trade deficit will widen, the rupee will depreciate further, and inflation will rise above the RBI’s comfort level, prompting the central bank to abandon the accommodative monetary stance. Will be forced. It may affect India’s growth recovery,” he said.

FPI flows are nothing but hot money and mainly follow four parameters, said

Shrikant Chauhan, Head (Equity Research-Retail) Kotak Securities said that FPI inflows mainly follow four parameters. First is the trend of Indian Rupee vis–vis dollar trend. Dollar and rupee have an inverse relationship.

Second, oil prices. He added that if they are at higher/advanced levels then it makes them less interested in investing in emerging markets as most of them are dependent on imports which hurt basic fundamentals.

Third, if the US 10-year bond yield rate begins to trend upward, it may make more sense to invest in the bond market than to hold money in riskier assets such as equities and, eventually, countries where The political event they invest in, it invites volatility and brings about a sudden change in price.

“Unfortunately, all these things are getting impacted at the same time, which is why there is a possibility of more outflows from FPIs,” Chauhan said.

With inputs from PTI