FPIs pull out Rs. 13,000cr from Indian shares this January
Foreign portfolio investors (FPIs) have pulled out a whopping Rs. 13,000 crore from Indian stocks in the first three weeks of January. However, they've poured Rs. 15,647 crore into the debt market during the same time. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believes this shift is primarily due to rising US bond yields and India's high valuations.
Reasons behind FPIs' cautious approach
Vijayakumar explains that the US bond yield has jumped from 3.9% to 4.15%, causing capital to flow out of emerging markets. Moreover, FPIs used HDFC Bank's lower-than-expected results as a reason to make massive sales, given India's high valuations. Himanshu Srivastava, Associate Director at Morningstar Investment Research India, also notes that FPIs started the year cautiously, taking profits in Indian equities as key stock indices hit record highs.
Uncertainty over interest rates and emerging markets
Srivastava further states that uncertainty surrounding interest rates has led FPIs to hold off and wait for more information before investing in emerging markets like India. FPIs have also been selling heavily in other emerging markets such as Taiwan, South Korea, and Hong Kong. Meanwhile, Kislay Upadhyay, founder of FidelFolio Investments, says that expectations of rate cuts in India have risen, making long-term debt bonds more appealing for investment.
Sector-wise investments and total FPI flows for 2023
As for sectors, FPIs have been snapping up IT stocks this month after Q3 results showed promise for a demand revival in the industry. In 2023, FPIs invested Rs. 1.71 lakh crore in equities and Rs. 68,663 crore in debt markets, totaling Rs. 2.4 lakh crore in the capital market. This comes after a net outflow of Rs. 1.21 lakh crore in 2022 due to aggressive rate hikes by central banks worldwide.
