FPIs’ Net Outflow From Equities Hits $1 Billion So Far In February
Foreign investors have pulled out so far this month Rs 6,850 crore from the Indian market in the wake of sell-offs.
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Foreign investors have pulled out so far this month $1 billion or Rs 6,850 crore from the Indian stock market in the wake of sell-offs globally.
This is against the total inflow of over Rs 13,780 crore by foreign portfolio investors in January, latest data with depositories showed.
In January, the U.S. unemployment rate stood at a 17-year low of 4.1 percent. In addition to this, there is a good possibility of an increase in the U.S. Federal Reserve rate to counter the rise in inflation. Overall we witnessed a sell-off globally. The FPI pull-out from Indian markets is most likely a result of this,Harsh Jain, Co-founder And Chief Operating Officer, Groww
Echoing similar views, Nalini Jindal, chief investment advisor at Intellistocks, said the U.S. inflation is hitting several years low, raising a possibility of a hike in the Fed rate; and this has resulted in a caution among FPIs.
The recent budget announcement to tax long-term capital gains and bringing FPIs into local compliance is one of the reasons as FPIs may want to book some profits to enjoy the benefits of grandfathering. This, however, could be a short-term scenario as India is one of the much sought after destinations for investments by FPIs.Nalini Jindal, Chief Investment Advisor, Intellistocks
According to the depositories data, FPIs withdrew a net amount of $1 billion (Rs 6,844 crore) from equities during Feb. 1-16.
However, they put in Rs 3,215 crore in the debt markets during the period under review.
Explaining the reason for inflow in the debt markets, Jain said, “India's 10-year bond yield crossed 7.5 percent, the first time since 2016 July. Similar is the case with the 10-year treasury yield. The inflow in debt market is expected when the arbitrage between the selling debt and buying equity squeezes.”
Interestingly, strong earning numbers in India besides a fall in crude prices in the past few days and correcting valuations make Indian markets look less expensive now, while domestic institutional investors are tapping this opportunity and have been net buyers in the Indian market in the last few days.