FPIs Continue Selling Spree: Withdraw Rs 7,300 Crore from Indian Equities in a Week
Foreign Portfolio Investors (FPIs) have continued their net selling trend in the Indian equity markets, withdrawing over Rs 7,300 crore (approximately $840 million) in the first week of February. This follows a substantial outflow of Rs 78,027 crore in January.
Reasons Behind the Outflow
Several factors have contributed to this continued selling pressure from FPIs:
- Global Trade Tensions: The imposition of tariffs by the United States on countries like Canada, Mexico, and China has heightened concerns about a potential trade war, leading to risk aversion among global investors.
- Rupee Depreciation: The Indian rupee has weakened significantly, breaching the Rs 87 per US dollar mark. A weaker rupee reduces returns for foreign investors, making Indian assets less attractive.
Expert Opinions
Analysts suggest that market sentiment will likely be influenced by global macroeconomic developments, domestic policy measures, and currency movements.
One expert noted that the strength of the dollar index and high US bond yields continue to put pressure on FPIs to sell. However, they also anticipate that FPI selling may decrease as the dollar index and US bond yields show signs of softening.
The victory of the BJP in the Delhi elections is expected to have a positive short-term impact on the market. The medium to long-term trend will depend on the recovery in GDP growth and earnings.
Debt Market Inflows
While FPIs were net sellers in the equity market, they were buyers in the debt market, investing Rs 1,215 crore into debt general limit and Rs 277 crore into debt voluntary retention route.
Overall Trend and Historical Comparison
The overall trend indicates a cautious approach by foreign investors, with net inflows into Indian equities significantly lower in 2024 at just Rs 427 crore, compared to the extraordinary Rs 1.71 lakh crore in 2023. In 2022, there was a net outflow of Rs 1.21 lakh crore.
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