Amid rise in dollar, bond yields, FPIs this week at Rs. 976 crore equity pulled out

After two weeks of buying, FPIs turned net sellers in Indian equities this week, with a net withdrawal of Rs 976 crore amid a strengthening US dollar and a sustained rise in US 10-year bond yields weighing on investor sentiment. Foreign Portfolio Investors (FPIs) started the week on a positive note, with equity holdings of Rs. 3,126 crore invested.

However, the trend reversed in the latter part of the week, with FPIs falling in the subsequent three sessions to Rs. 4,102 crore worth of equities were offloaded. Data from the National Securities Depository Ltd shows that this resulted in a week-long loss of Rs. There was a total net outflow of 976 crores.

Despite this short-term reversal, the broader December trend remains positive. FPIs have so far this month invested Rs. 21,789 crore invested, reflecting continued confidence in India’s economic growth potential and its resilient markets.

FPIs took a cautious approach due to uncertainty over the US Fed meeting and its outcome and future policy direction, said Himanshu Srivastav, associate director, manager research, Morningstar Investment Research India.

When the Fed cut interest rates by 25 bps for the third time this year, it signaled fewer rate cuts in the future, denting investor sentiment and triggering a sell-off in global markets, he added.

Further, factors such as higher valuations, weak corporate earnings for the September quarter, expectations of lower December results, rising inflation, slower GDP growth and a depreciating rupee have further weighed on investor confidence, he noted.

“A rising US dollar (dollar index above 108) and a sustained rise in the US 10-year bond yield to 4.5 per cent contributed to the selling of FPIs.

“India-specific issues such as slow growth concerns and flat corporate earnings in Q2 also contributed to the sell-off of FPIs. The strength of the US economy, good corporate earnings growth and a strong dollar are factors favoring the US,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. said.

The FPI sell-off has reduced valuations in some large-cap segments, such as banking, making valuations more attractive. Investors can take advantage of this market slowdown to invest in quality large caps.

Sectors like pharma, IT and digital platform companies are expected to remain resilient and defy the downtrend.

In early November, FPIs had netted Rs. 21,612 crore and in October Rs. 94,017 crore, which was the worst monthly outflow on record.

Interestingly, September marked a nine-month high for FPI inflows, with Rs. Volatility in foreign investment trends was highlighted with a net inflow of Rs 57,724 crore.

So far in 2024, FPI investment will reach Rs. 6,770 crore, data with depositories showed.