Adopting a cautious stance, foreign investors pulled over ₹4,500 crore from the Indian equity market last week on fears of an aggressive rate hike by US Federal Reserve.
Markets were closed on April 14 and April 15 on account of Ambedkar Jayanti and Good Friday, respectively.
According to depositories data, FPIs have pulled out a net sum of ₹Rs 4,518 crore from Indian equities during the holiday-shortened April 11-13 week. This comes following a net investment of ₹7,707 crore by foreign portfolio investors (FPIs) during April 1-8 as a correction in the markets provided a good buying opportunity, data with depositories showed.
Prior to that, FPIs remained net sellers for six months to March 2022, withdrawing a massive net amount of ₹1.48 lakh crore from equities. These were largely on the back of anticipation of a rate hike by the US Federal Reserve and due to the deteriorating geopolitical environment following Russia's invasion of Ukraine.
Sonam Srivastava, Founder at Wright Research, a SEBI-registered investment advisor, said, "We are hoping for FPIs to come back to India in a big way when the Ukraine crisis eases as our valuations have become highly competitive".
Apart from equities, FPIs withdrew a net ₹415 crore from the debt markets during the period under review, after infusing a net sum of ₹1,403 crore in the preceding week.
"The sellout by FPIs was in line with the global rout in equity markets caused by the concerns about the FED hiking rates. In addition, the inflation numbers for India that came out last week were above expectation, and they further dampened sentiment. The RBI is also seen shifting its stance towards tightening, which could stress the equity markets," Wright Research's Srivastava said.
“Given the fast-changing global landscape, foreign flows into Indian equities could shift either way depending on how the underlying scenario changes,” Morningstar India’s Srivastava said.
Last month US Fed hiked rates, for the first time since 2018, by a quarter percentage point, thus finally ending its ultra-easy pandemic-era monetary policy and indicating a series of more rate hikes this year. The war between Russia and Ukraine is still going on. Also, there is uncertainty around US Fed's next move.