ICICI Securities said the hawkish comments by the US Federal Reserve chairman at the Jackson Hole symposium is an extension of the QT cycle, which began in 2021 and resulted in the biggest quantum of FPI outflows from India over a one-year period.
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NEW DELHI: The massive foreign outflows that India saw earlier this year in anticipation of a 1960-80 type of extreme quantitative tightening (QT) cycle was probably an overreaction, said
, adding those expectations were correcting with strong inflows seen since July.
Data available with NSDL suggests FPIs were net sellers of domestic equities for nine straight months, before they turned buyers in July with Rs 4,989 crore. The trend continued in August with Rs 51,204 crore and, so far this month, the institutional category has been a buyer of equities with Rs 4,260 crore inflows.
ICICI Securities said the hawkish comments by the US Federal Reserve chairman at the Jackson Hole symposium is an extension of the QT cycle, which began in 2021 and resulted in the biggest quantum of FPI outflows from India over a one-year period. It noted that FPIs had sold some $33 billion worth of equities in 12 months to June 2022.
"The massive outflow, in anticipation of a 1960s-80s type of extreme QT cycle, was probably an overreaction which is correcting via inflows seen since July. Although not as extreme as originally thought, we continue to be in a QT cycle which will result in bouts of volatility from FPIs although the phase of ‘unprecedented relentless selling’ seems to be behind us," it said.
The brokerage said the trajectory of inflation going ahead in the US will be a key determinant of FPI flows in general towards EMs, including India.
FPI selling in H12022 of about $29 billion (including primary flows) was largely driven by financials and IT and to a lesser extent by discretionary consumption, oil and gas and cement.
Top stocks with increase in FPI holding during the first half of the calendar were
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