Foreign portfolio investors (FPIs) have sold Rs 18,756 crore in Indian markets so far in February due to geopolitical tensions and prospects of rate hike by the US Federal Reserve.
According to depositories data, overseas investors sold Rs 15,342 crore in equities and Rs 3,629 crore in bond markets between February 1-18. However, he invested Rs 115 crore in hybrid instruments during this period. Thus, during this period FPIs sold a total of Rs 18,856 crore. This is the fifth consecutive month that foreign investors have pulled out from the Indian markets.
48,646 crore withdrawn so far this year
Thus FPIs have sold Rs 48,646 crore so far this year. According to NSDL data, in January, foreign investors pulled out Rs 33303 crore from the Indian stock market.
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Himanshu Srivastava, Associate Director-Manager Research, Morningstar India, said, “FPIs have been exiting the Indian equity markets in recent times amid geopolitical tensions and the possibility of an interest rate hike by the US Federal Reserve. Their selling has also intensified after the US central bank indicated a hike in interest rates.
Investors’ trend towards safe investments like bonds-gold
Shrikant Chauhan, head-equity research (retail), Kotak Securities, said rising tensions between the US and Russia over Ukraine have turned investors towards safer investments like bonds and gold. “FPIs have pulled out around $8 billion from Indian equities in the last one year. This is the highest figure since 2009.
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Federal Reserve’s tough stance increased selling
FPI sell-offs increased after the US Federal Reserve indicated a easing of the easing monetary stance. Globally, bond yields have risen after the US central bank signaled an interest rate hike. Inflation in the US has reached a 40-year high. In such a situation, the US central bank may increase interest rates aggressively in the coming months. This may further increase the outflow of foreign funds from Indian stocks. On the other hand, inflation in England broke the record of 30 years.
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