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Flows from foreign portfolio investors (FPIs) are expected to remain volatile in the near term given the headwinds in terms of elevated crude prices and inflation, experts said
Topics
Foreign Portfolio Investors | US Fed | Fed rate hikes
Continuing their selling spree for the sixth consecutive month, foreign investors pulled out a massive ₹41,000 crore from the Indian equity market in March on anticipation of rate hikes by the US Federal Reserve and the deteriorating geopolitical environment amid the Russia-Ukraine war.
According to data available with the depositories, FPIs were net sellers to the tune of ₹41,123 crore in the equity market last month.
This was way higher than net withdrawals of ₹35,592 crore in February and ₹33,303 crore in January.
Commenting on the latest outflow, Atanuu Agarrwal, co-founder, UpsideAI, said “the primary reason remains the changing interest rate environment and the Fed’s signal to end the stimulus.”
“There are multiple other reasons — India is expensive, crude has shot up, INR is weak, Russia-Ukraine conflict leads to flight to safety. But all things being equal, if the Fed had signalled a delay in raising rates, we may not have seen a sale of this scale,” he added.
Nikhil Kamath, co-founder, True Beacon and Zerodha, said India looks expensive on a relative basis, and FPIs could be rebalancing into China and other opportunities by reducing their India exposure.
Cyclically, this is the first time we have noticed a prolonged inverse correlation between FPI flows and Nifty, he added.
Apart from equities, the debt market saw net outflows to the tune of ₹5,632 crore in March.
“However, given the headwinds in terms of elevated crude prices, inflation, etc FPI flows are expected to remain volatile in the near term,” he added.
The war between Russia and Ukraine too continues. Therefore, under the given fast-changing global landscape, foreign flows into Indian equities could shift either way depending on how the underlying scenario changes, Morningstar India’s Srivastava said.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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First Published: Sun, April 03 2022. 14:28 IST
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