Foreign investors offloaded nearly ₹5,900 crore from the Indian equity markets in the first week of January on growing concerns over the re-emergence of Covid in some parts of the world and recession worries in the US.
Foreign Portfolio Investors (FPIs) have been adopting a cautious stance toward Indian equity markets for the past few weeks.
Going forward, FPIs flow is expected to remain volatile amid GDP growth concerns, high global interest rates, and muted earnings expectations in the third quarter, Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities Ltd, said.
According to data with the depositories, FPIs have made a net pull out of ₹5,872 crore from the Indian equity markets during January 2-6.
In fact, foreign investors have been selling for 11 consecutive days, taking the cumulative selling to ₹14,300 crore. This came following a net inflow of ₹11,119 crore in December and ₹36,239 crore in November.
Overall, FPIs have made a net withdrawal of ₹1.21 lakh crore from the Indian equity markets in 2022 on an aggressive rate hike by the central banks globally, particularly the US Federal Reserve, volatile crude, rising commodity prices along with Russia and Ukraine conflict.
This was the worst year for FPIs in terms of flow, and withdrawal from equities comes following a net investment in the preceding three years.
The latest outflow in January could be attributed to the concerning cues emanating from both global, as well as domestic quarters. "Increasing concerns over re-emergence of Covid in some parts of the world and recession worries in the US have been keeping FPIs away from emerging markets like India," Himanshu Srivastava, Associate Director - Manager Research at Morningstar India, said.
Also, in the midst of the ongoing uncertainty, many investors would have also chosen to book profits with Indian markets, touching all-time highs in the recent past. The money taken out from India is being invested in the underperformers of last year like China and Europe, which are doing well now. Clearly, FPI money is chasing lower valuations by selling in overvalued markets like India, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
If the FPI selling continues, it will open up opportunities for investors. FPIs will sell in stocks in which they are sitting on profits, like the banking segment, he said.
Last year, too, selling by FPIs in banks turned out to be an opportunity for domestic investors. In addition to equities, FPIs have offloaded debt securities to the tune of ₹1,240 crore during the first week of January.
Apart from India, FPI flows were negative for Taiwan and Indonesia so far this month, while it was positive for the Philippines, South Korea, and Thailand.