Following an aggressive rate hike by the US Federal Reserve, foreign investors sold off Rs 4,500 crore from the Indian equity market last week alone. Foreign portfolio investors (FPIs) have remained net sellers for six months to March 2022.
The massive sale comes after a net investment of Rs 7,707 crores by FPIs in the first week of April. The data with depositories showed that the markets were providing a good buying opportunity. FPIs also withdrew Rs 415 crore from debt markets after infusing a net sum of Rs 1,403 crores the week before.
The rise in domestic (US) interest rates, anticipated lower returns in dollar terms, and likely fall in the value of the Rupee have played a role in the sell-off.
The concerns were deepened when the inflation numbers for India turned out to be higher than expected last week. The RBI is also tightening its policies which can stress equity markets, said Mr. Srivastava. Manoj Trivedi, Co-founder of Jama Wealth, thinks the sell-off has nothing to do with India-specific factors, and investors are simply moving to "safer havens".
After the rate hike by the US, investors are seeking a cautious stance in emerging markets like India. The trend is likely to continue until there is greater clarity, opined Himanshu Srivastava, Associate Director - Manager Research at Morningstar India.
A net sum of Rs 4,518 crores was pulled out from Indian equities between April 11 and 13. Markets closed on April 14 and 15 on account of Ambedkar Jayanti and Good Friday.
The worsening situation between Russia and Ukraine triggered a change of attitude among FPIs. Sonam Srivastava, Founder of Wright Research, said that they are hoping the FPIs will return in a big way after the Ukraine crisis eases.