After pumping in money over the past two months, foreign investors have turned net sellers, pulling out over Rs 13,400 crore from Indian stocks in August so far due to the sell-off of the yen carry trade and fears of a US recession.
So far this year, FPIs have made a net investment of Rs 22,134 crore in equities, depositories data showed.
Going forward, if the market continues to rise, FPIs are likely to push for more selling as valuations of Indian equities continue to remain elevated, particularly relative to valuations in other markets, said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
According to the data, foreign portfolio investors (FPIs) withdrew a net amount of Rs 13,431 crore from equities so far this month (August 1-9).
This came after an inflow of Rs 32,365 crore in July on expectations of sustained economic growth, continued reforms and a better-than-expected earnings season, and Rs 26,565 crore in June driven by political stability and strong rally in markets.
Prior to that, FPIs withdrew Rs 25,586 crore in May on election jitters and over Rs 8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields.
The latest outflow was triggered by the unwinding of the yen carry trade after the Bank of Japan raised interest rates to 0.25 percent and by fears of a U.S. recession, Vijayakumar said.
This was further aggravated by escalating geopolitical tensions, particularly the escalating conflict between Israel and Iran, which prompted investors to reduce their risk exposure, said Himanshu Srivastava, associate director of asset manager research at Morningstar Investment Research India.
Moreover, the higher valuation of Indian markets provided foreign investors with an attractive profit-making opportunity.
Meanwhile, factors such as rising US recession fears, driven by weak jobs data, and uncertainty around the timing of interest rate cuts led to the outflow from Indian stocks, Srivastava added.
During the two-week period ending July 31, IFPs maintained short positions in the financial services sector, but also bought positions in the IT, automobile, capital goods and metals sectors during the period under review.
Meanwhile, foreign investors have poured Rs 6,261 crore into the debt market in August so far, taking the total to Rs 97,249 crore so far in 2024.
First published: August 11, 2024 | 10:56 am IS
Disclaimer
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.