Foreign portfolio investors (REITs) have so far withdrawn Rs 18,856 crore net from Indian markets in February amid geopolitical tensions and risks of a rate hike by the US Federal Reserve. According to data from custodians, foreign investors withdrew Rs 15,342 crore from equities and Rs 3,629 crore from the bond market between February 1 and 18. At the same time, they invested Rs 115 crore in hybrid instruments.
This results in a net outflow of Rs 18,856 crore during the period under review. This is the fifth consecutive month of outflows of foreign funds. “Geopolitical tensions and risks of a rate hike by the US Fed have recently triggered capital outflows from REITs in Indian equity markets. They sharply increased the pace of selling after the US Fed signaled the end of the regime of ultra-loose monetary policy,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.
Shrikant Chouhan, Head – Equity Research (Retail), Kotak Securities, said investors turned to defensive sectors and safe havens such as bonds and gold as tensions flared between the United States and China. Russia about Ukraine. “Net REIT outflow from Indian equities over the past year is close to $8 billion. This figure is the highest since 2009. In February to date, FIIs have sold for around Rs 17,500 crore. The REIT’s view on India is that India has already looked at earnings growth of 16-18% CAGR for FY23-24, based on expectations of an earnings growth cycle and the economy…
“Yet these estimates do not take into account the risks of rising cost of capital in the United States (the cost of capital in India is linked to the cost of capital in the United States) and therefore the potential for contraction of private equity, nor the inflation risk affecting earnings growth estimates,” Rajesh said. Bhatia, MD, and CIO, ITI Long Short Equity Fund. REITs can be expected to sell more going forward unless market corrections make valuations attractive, said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Domestic institutional investors and HNIs are slowly accumulating high-quality financial stocks whose valuations have become attractive due to the sustained selling of REITs, he added.