FPIs withdrew ₹7,500 crore from Indian equities in October over concerns of rate hike

Foreign investors pulled around Rs 7,500 crore from Indian equity markets in the first two weeks of October on concerns of tightening monetary policy by the US Federal Reserve and other central banks globally, which could hamper global economic growth.

With this, total outflows by foreign portfolio investors (FPIs) have reached ₹1.76 lakh crore so far in 2022, data from the depositories showed.

Going forward, FPI inflows are expected to remain volatile in the coming months due to ongoing geopolitical risks, high inflation, expectations of rising treasury yields, etc, said Shrikant Chauhan, Head-Equity Research (Retail), Kotak Securities.

“Markets were cautious ahead of the release of the US CPI print, which could set the pace for future rate hikes in the US,” he added.

According to the data, FPIs pulled out Rs 7,458 crore from equities during October 3-14.

This came after outflows of over ₹7,600 crore in September on the US Fed’s tough stance and sharp depreciation in the rupee.

Earlier, FPIs had made a net investment of Rs 51,200 crore in August and around Rs 5,000 crore in July. Before July, foreign investors were net sellers in Indian equities for nine consecutive months.

Himanshu Srivastava, Associate Director- Manager Research, Morningstar India, said the latest pullback by FPIs was largely driven by concerns of monetary policy tightening by the US Fed as well as other central banks globally, which would hamper global economic growth. can do

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The key trigger for FPI selloff is sustained dollar appreciation and expects the dollar to remain strong in the current global macro buildup.”

Flows from FPIs have been inconsistent over the past few months as they keep changing their stance to keep track of the rapidly changing investment landscape.

The broader sentiment has been inappropriate, though there has been some intermittent relief.

“Expectations of further aggressive rate hikes by the US Fed, depreciating rupee, fears of recession and continuing conflict between Russia and Ukraine will continue to negatively impact foreign flows into Indian equities. This scenario has created an atmosphere of uncertainty. To provide risk aversion to major investors,” Srivastava said.

Vijayakumar observed that a significant trend in FPI sales is that whenever they sell consistently, the sales are in financial and IT which form the largest share of FPI holdings. This trend is still visible.

Besides, FPIs are also selling in oil and gas and metals as these segments will also be affected by the global economic slowdown.

Apart from equities, foreign investors have pulled out Rs 2,079 crore from the debt market during the period under review.

Apart from India, FPI inflows have been negative for the Philippines, Taiwan and Thailand so far this month.