equity market: FPIs turn net sellers after 6 months of investment; withdraw Rs 14,767 cr in Sept

After sustained buying in the last six months, FPIs have turned net sellers and pulled out of over Rs 14,767 crore from Indian equities in September, primarily due to dollar appreciation, steady rise in the US bond yields, and a spike in crude oil prices. Going forward, the outlook for FPI flows in India is uncertain, as it will depend on the performance of the Indian economy, the RBI’s October monetary policy, and the outcome of the September quarter earnings, Mayank Mehra, smallcase, manager and principal partner at Craving Alpha, said.

According to data with the depositories, Foreign Portfolio Investors (FPIs) have sold shares to the tune of Rs 14,767 crore in September.

The latest outflow came after FPI investment in equities had hit a four-month low of Rs 12,262 crore in August. Before the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and brought in Rs 1.74 lakh crore during the period.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the latest selling has been in response to steady dollar appreciation, which took the dollar index close to 107, and the steady rise in the US bond yields which took the US 10-year bond yield to around 4.7 per cent. Also, the spike in Brent crude to USD 97 weighed on FPI selling.

Additionally, FPIs have pulled out money from India due to rising US interest rates, Mehra said.

Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, attributed the outflow in September to economic uncertainties in the US and Eurozone regions, as well as growing concerns about global economic growth. This scenario led foreign investors to turn risk-averse.

Additionally, higher crude prices, sticky inflation numbers and the expectation that the interest rate may continue to remain at elevated levels longer than expected would have prompted foreign investors to adopt a wait-and-watch approach, he said. Further, sub-normal monsoon in India and its impact on inflation is also a concern for the domestic economy, which foreign investors would be cognisant of, he added.

The selling by FPIs was countered by domestic institutional investors (DII) buying.

On the other hand, FPIs invested Rs 938 crore in the country’s debt market during the period under review.

With this, the total investment by FPIs in equity has reached Rs 1.2 lakh crore and over Rs 29,000 crore in the debt market so far this year.

In terms of sectors, FPIs were buyers of capital goods and selected financials.

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