Foreign portfolio investors (FPIs) grew jittery and continued selling last week, offsetting strong net buying in the first two weeks of December. However, December net FPI investments remained positive at ₹21,789 crore as on December 20, depositor data showed.
However, the latest monthly figures (till December 20) contrast with the heavy equity outflows by these investors in the months of October and November, when the net outflows were ₹21,612 crore and ₹94,017 crore respectively.
So far this calendar year, FPI inflows have been just ₹6,770 crore.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the sudden change in FPI strategy from buying to selling (in December) has impacted the markets.
In the early days of December, FPIs were consistent buyers; they bought shares for ₹14,435 crore in the cash market till December 13. ‘But then they became big sellers. For the week ended December 20, FIIs sold shares worth ₹15,828 crore in the money market, selling on all days. The rising dollar (dollar index above 108) and steady rise in US 10-year bond yields to 4.5 percent contributed to the selling of the FPI,” he said.
India-specific issues such as concerns over slowing growth and flat corporate profits in the second quarter also contributed to FPI sales.
“The strength of the US economy, good corporate earnings growth and the strong dollar are factors that favor the US.
FPIs will become buyers when we have news on GDP growth and recovery in earnings growth. The third quarter data could be slightly positive,” Vijayakumar said.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said the uncertainty among foreign investors regarding investments in the Indian equity markets is clearly visible in the flow trend in recent weeks.
“After two weeks of net buying, they turned net sellers last week and have continued selling in the Indian equity markets this week as well. Although the quantum has not been significant, it indicates a wait-and-see approach,” he said.
This week they sold net assets of $114 million, compared to last week’s net outflow of $199 million.
“Their cautious approach was largely due to the US Fed meeting held this week and the uncertainty surrounding its outcome and future course of action.
However, the outcome was not promising. While the US Fed cut rates by 25 basis points, marking the third rate cut this year, it signaled a much lower likelihood of rate cuts next year, denting investor sentiment and fueling broad-based selling, roiling markets worldwide were shocked. said.
In addition, rich valuations, lower than expected corporate earnings for the September quarter, expectations of subdued corporate results for the December quarter as well, high inflation rates, lower than expected GDP numbers and the depreciating rupee do not make for a very encouraging picture. photo to improve investor sentiment, he added.
“Also, uncertainty remains over the start of the rate cut cycle in India, which could keep investors on the sidelines,” Srivastava said.
