Foreign portfolio investors (FPIs) have become net sellers in the capital markets in October so far, reversing the trend of net investments in the previous two months, due to the depreciation of the rupee and global factors, the officials said. experts. According to depositary data, FPIs have withdrawn Rs 1,472 crore from capital markets in net terms in the current month so far.
A trend reversal was observed in the debt segment in October due to large purchases in the previous two months, when FPIs had invested Rs 13,363 crore in September and Rs 14,376.2 crore in August. In October so far, they took out Rs 1,698 crore. “This trend reversal in debt investment is due to the INR depreciation in October,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
In equities, the FPIs invested Rs 226 crore on a net basis. ”FPIs that were sellers of bank shares in the first half of September became buyers in the second half. But they were software service vendors for the whole of September. The strong performance of IT companies such as Wipro, Infosys and Mindtree is likely to attract more flows to the segment in the future, ”he added.
Himanshu Srivastava, associate director – research manager at Morningstar India, said that as markets hit all-time highs and valuations skyrocketed, FPI would have preferred to stay on the sidelines, take a wait-and-watch approach, and continue to post gains along the way. . “There is still concern among FPIs regarding easy liquidity reduction after the US Fed hinted at a rate hike earlier than expected. Concerns such as rising oil prices and US bond yields and challenges to the Chinese economy have also been on their radar, keeping them on their toes and preventing them from investing substantially in Indian markets, “he added.
On the future of FPI flows, Shrikant Chouhan, head of equity research (retail), Kotak Securities said that Brent crude prices are trading at high levels and a sharp rise in energy prices may be a key factor. for equity markets. Furthermore, any rate hike by the US Federal Reserve in the near future would also act as a key headwind to the overall flow in emerging markets. Therefore, FPI flows are expected to remain volatile in emerging markets.