NEW DELHI, Jan 19: Foreign investors have withdrawn Rs 44,396 crore from Indian equities this month, influenced by the strengthening dollar, increasing bond yields in the US, and predictions of a lackluster earnings season.
This follows an investment of Rs 15,446 crore in December, according to data from the depositories.
The change in sentiment occurs amid both global and domestic challenges.
“The ongoing depreciation of the Indian rupee is putting considerable strain on foreign investors, prompting them to withdraw funds from the Indian equity markets,” stated Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Advisers India.
Moreover, the elevated valuations of Indian equities, despite recent declines, coupled with expectations of a weak earnings season and uncertainty surrounding economic growth, are making investors cautious, he added.
Data indicates that Foreign Portfolio Investors (FPIs) have divested shares worth Rs 44,396 crore from Indian equities so far this month (up to January 17).
FPIs have been net sellers on every day this month except January 2.
“The key factors behind the persistent selling by FPIs are the dollar’s strength and rising bond yields in the US. With the dollar index surpassing 109 and the 10-year US bond yield exceeding 4.6 percent, it is understandable for FPIs to sell off in emerging markets, particularly in the more expensive emerging market of India,” explained V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Given that US bond yields are appealing, FPIs have also sold off in the debt market, withdrawing Rs 4,848 crore from the debt general limit and Rs 6,176 crore through the debt voluntary retention route.
Vipul Bhowar, Senior Director – Listed Investments at Waterfield Advisors, mentioned that a cyclical rebound in corporate earnings, along with robust GDP growth driven by resilient domestic consumption and heightened government spending on infrastructure projects, could lead to a potential resurgence in FPI inflows into India.
The overall trend reflects a cautious stance from foreign investors, who have significantly reduced their investments in Indian equities in 2024, with net inflows of merely Rs 427 crore.
This sharply contrasts with the remarkable net inflows of Rs 1.71 lakh crore in 2023, fueled by optimism regarding India’s strong economic fundamentals. In comparison, 2022 faced a net outflow of Rs 1.21 lakh crore due to aggressive rate hikes by global central banks. (PTI)
