Foreign investors withdraw ₹14,800cr from Indian stocks post election results
Foreign investors have withdrawn nearly ₹14,800 crore from Indian stocks in the first week of June. This move was influenced by the results of India's Lok Sabha elections and the attractive valuations of Chinese stocks. The outflow occurred after a net outflow of ₹25,586 crore in May due to election apprehensions, and over ₹8,700 crore in April owing to worries about adjustments in India's tax treaty with Mauritius, and a continuous increase in US bond yields.
Election results trigger massive outflow
The general election results have influenced foreign investor flows in Indian equity markets in June, per Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India. The market sentiment took a turn when the actual election results deviated significantly from the exit poll predictions, which had claimed a decisive victory for the BJP and NDA government. This discrepancy triggered a massive outflow by foreign investors.
Shift capital to cheaper markets, favoring Chinese stocks
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that foreign portfolio investors (FPIs) find Indian valuations to be high and are moving capital to more affordable markets. He stated, "The FPI pessimism regarding Chinese stocks appears to be over and there is a trend of investing in Chinese stocks listed in the Hong Kong Exchange since the valuations of Chinese stocks have turned very attractive."
Over ₹4,000cr invested in Indian debt market
Despite the withdrawal from equities, foreign portfolio investors (FPIs) have invested over ₹4,000 crore in the Indian debt market. This inflow is driven by the coming inclusion of Indian government bonds in the JP Morgan Index. Experts believe that long-term outlook for FPI flows into Indian debt is positive due to India's inclusion in global bond indices.
FPIs withdrawal and investment trends in 2024
In 2024 so far, foreign portfolio investors (FPIs) have withdrawn a net amount of ₹38,158 crore from equities. However, they have invested ₹57,677 crore in the debt market. The near-term flows are getting impacted by global macroeconomic uncertainty and volatility.
