FPIs withdraw ₹12,300 cr in April from equities on fear of US Fed rate hike
PremiumAfter six months of selling spree, FPIs had turned net investors in the first week of April and invested ₹7,707 crore in equities
On account of US Fed interest rate hike, Foreign Portfolio Investors (FFPIs) have withdrawn around ₹12,300 crore from the Indian equity market in April 2022 till date. FPIs have remained net sellers for last six months as from October 2021 to March 2022, they have pulled out massive ₹1.48 lakh crore from Indian equities. According to stock market experts, this continuous selling by FPIS can be attributed to two major reasons — US Fed's hawkish stance on interest rate hike and geopolitical tension caused by Russia-Ukraine war. Apart from equities, FPIs withdrew a net ₹1,282 crore from the debt markets in April 2022 as well.
After six months of selling spree, FPIs turned net investors in the first week of April and invested ₹7,707 crore in equities. After a short breather, once again they turned net sellers to the tune of over ₹4,500 crore during the holiday-shortened April 11-13 week and the sell-off continued in the succeeding week too.
This makes foreign investors net sellers to the tune of ₹12,286 crore in this month so far (April 1-22), data with depositories shows.
"The fears of an aggressive rate hike by the US Fed, continue to dent investor sentiments. This could have prompted investors to again adopt a cautious stance towards their investments in emerging markets like India," said Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said.
Manish Jeloka, Co-head Products & Solutions, Sanctum Wealth, said that its easy money is getting pulled back as central bankers have started pulling back excess liquidity amid risk-off scenarios due to geopolitical tensions.
He, further, said that rising interest rates in developed markets is usually accompanied by withdrawals from emerging markets.
According to Srivastava, there is nothing much at the moment which could cheer-up foreign investors and coax them to invest in Indian equity markets.
"Besides an imminent rate hike by the US Fed, uncertainty surrounding the Russia-Ukraine war, high domestic inflation numbers, volatile crude prices and weak quarterly results doesn't paint a very positive picture. In such a scenario, FPIs typically adopt a wait and watch approach until greater clarity emerges," he said.
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Given the headwinds in terms of elevated crude prices, Inflation, lower GDP, etc, FPIs flows are expected to remain volatile in the near term, Shrikant Chouhan, Head - Equity Research (Retail), Kotak Securities, said.
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