FPIs withdraw ₹22,420 crore from Indian markets this month
What's the story
Continuing their bearish trend on Indian markets this month, Foreign Portfolio Investors (FPIs) have pulled out a whopping ₹22,420 crore in the first half of November. The data was released by the National Securities Depository Limited (NSDL). The latest withdrawal comes after a massive offloading of ₹1,13,858 crore by FPIs in October. Despite their exit from the secondary market (sales worth ₹32,351 crore through exchanges), FPIs have maintained their interest in the primary market with investments worth ₹9,931 crore.
Market apprehension
FPIs show caution toward Indian debt markets
Along with their exit from the equity market, FPIs have also been cautious toward Indian debt markets. Outflows from these markets have touched ₹4,717 crore in the first two weeks of November. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed this continuous selling by FPIs to three major factors: high valuations in India, concerns about earnings downgrade, and the impact of US President-elect Donald Trump's trade policies.
Potential impact
FPI outflows could pose challenges for India
The incessant outflows from FPIs could prove to be a challenge for Indian markets in the near future. This is because foreign investors are constantly rejigging their portfolios on global and domestic factors. Trump's victory has rocked both equity and bond markets in the US, with equities booming on hopes of corporate tax cuts and pro-business policies under him.
Market reaction
Trump's victory impacts US bond market
On the flip side, the US bond market has been impacted by fears of a rising fiscal deficit under Trump. "The sharp upmove of the 10-year US bond yield to 4.42% has negative implications for emerging markets. This is reflected in the FPI selling in the debt market, too," said Vijayakumar.