Foreign Portfolio Investors (FPIs) have continued selling as they withdrew more than Rs 3,400 crore from the Indian equity markets in the first three trading sessions of November, data from the depositories revealed. This selling was attributed to surging interest rates and geopolitical tensions arising in the Middle East.
This development took place after the investors withdrew Rs 24,548 crore in October and Rs 14,767 crore earlier in September, reported PTI. Prior to the outflow, the investors were consistently buying Indian equities from March to August and poured in Rs 1.74 lakh crore in the markets during the period.
Commenting on the trend, V K Vijayakumar, chief investment strategist at Geojit Financial Services, said, “Going forward, this selling trend is unlikely to continue since the main trigger for FPI selling, the rising bond yields, has reversed on the US Federal Reserve signalling a dovish stance in its November meeting. The main trigger for this reversal in bond yields is the subtle dovish commentary from Fed chief Jerome Powell that ‘despite elevated inflation, inflationary expectations remain well anchored’. The market has interpreted this statement as the end of the rate hiking cycle.”
The data further revealed that FPIs sold equities worth Rs 3,412 crore during the trading sessions from November 1-3. Himanshu Srivastava, associate director – manager research, at Morningstar Investment Adviser India, noted, “ FPIs have been on a selling spree since the start of September.
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This could be largely attributed to the growing geopolitical tensions due to the conflict between Israel and Hamas, alongside a notable rise in US Treasury bond yields.”
Another analyst, Bharat Dhawan, managing partner at Mazars, a professional consulting firm, stated, “The global landscape has become significantly more uncertain, with a tripled impact of recessionary concerns, rising inflation, and the outbreak of geopolitical conflicts in the first week of October.”
Experts currently believe that safe-haven assets like gold and the US dollar could be in focus. Meanwhile, the data showed that the debt market saw an inflow of Rs 1,984 crore in the first three trading days of November, after receiving Rs 6,381 crore in October. Commenting on this development, Srivastava said, “This approach may represent a tactical move by foreign investors to allocate funds to Indian debt in the short term, with the intention of redirecting capital into the equity markets when conditions become more favourable.”
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With these developments, the FPIs’ total investments in equity this year so far have reached Rs 92,560 crore and touched Rs 37,485 crore in the debt market. Sector-wise, banking, automobiles, capital goods, and real estate are projected to do well.
