Gangtokian News Desk: Foreign Portfolio Investors (FPIs) have withdrawn a substantial Rs 17,000 crore from Indian equities within the first ten days of May, citing concerns over political uncertainty and expensive valuations. This sharp outflow surpasses the net withdrawal of Rs 8,700 crore witnessed in the entirety of April, primarily attributed to apprehensions surrounding a potential alteration in India’s tax treaty with Mauritius and the sustained ascent of US bond yields.
In contrast to this recent trend, FPIs exhibited a positive sentiment in the preceding months, injecting a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February. However, the impending general election has induced a cautious stance among investors, prompting them to await the outcome before resuming significant market activity.
Trivesh D, Chief Operating Officer at Tradejini, anticipates that post-election, favorable results coupled with stable political conditions could prompt a resurgence of FPI interest, particularly in light of corporate India’s robust financial performance in the fourth quarter of FY24.
According to data from depositories, FPIs recorded a net outflow of Rs 17,083 crore from equities by May 10th, reflecting their apprehension amidst the ongoing election period. Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, highlights the high valuation of Indian markets as a contributing factor, suggesting that investors may view the current scenario as an opportune moment for profit-taking.
Krishna Appala, smallcase manager & Senior Research Analyst at Capitalmind, underscores the prevailing political uncertainty in India and the attractiveness of US interest rates as key determinants influencing FPI behavior. Additionally, Trivesh suggests that profit booking ahead of potential market corrections, particularly around results day, may have further spurred FPI withdrawals.
Meanwhile, on the global front, the US Federal Reserve’s indication of refraining from rate cuts until inflation subsides has cast doubts on the likelihood of an early rate adjustment. This stance has led to an uptick in US Treasury yields, consequently impacting FPI decisions.
In tandem with the equity outflow, FPIs withdrew Rs 1,602 crore from the debt market during the same period. This contrasts with earlier months, where FPIs injected substantial amounts into the market, driven by anticipation surrounding the inclusion of Indian government bonds in the JP Morgan Index by June 2024. The envisaged benefits of this inclusion include attracting an estimated USD 20-40 billion over the subsequent 18 to 24 months.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, notes that FPIs have consistently been sellers in 2024, withdrawing a net amount of Rs 14,860 crore from equities. However, they have concurrently invested Rs 14,307 crore in the debt market, reflecting a shift in investment preferences amidst prevailing market dynamics.
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Gangtokian Web Team, 13/05/2024