FPI SELLING TOPS $2 BILLION IN MAY

Foreign portfolio investor (FPI) selloff has crossed the $2-billion mark in first six trading sessions of May. Overseas funds yanked out $2.01 billion from domestic equities until May 9, according to NSDL data. On Friday, they sold shares worth another $250 million, according to provisional data provided by exchanges.

The selling pressure from FPIS has come amid hardening of bond yields in the US, as its central bank official has said interest rates will likely need to be held at a two-decade high for longer than previously thought. “The recent upward surprises to activity and inflation suggest the likely need to keep policy at its current level until we have greater confidence that inflation is moving sustainably towards 2 per cent,” Federal Reserve Bank of Boston President Susan Collins said this week. The pullout from the Indian markets this month is the highest among emerging market peers. The selling by FPIS has come at a time when traders are increasingly becoming anxious over the margin of victory of the incumbent Narendra Modi government in the ongoing Lok Sabha elections. The Vix Index on Friday rose for a 12th straight day to hit a fresh 20-month high of 18.47. “The big selling happened after the US Fed’s statement where it looked like the rates would be higher for longer. Then, investors felt that if one is getting higher rates in the US with dollar-designed investments, it is not worth taking risks in emerging markets. With Fed rates looking higher for longer, even RBI is unlikely to do anything different. The election uncertainty is also causing some concern, with some rumours saying the ruling combine may not have the dominance they had in the first 10 years. People want to keep some dry powder ahead of the result announcement on June 4,” said UR Bhat, co-founder of Alphaniti Fintech.