FPIs’ equity sell-off continues, withdraw ₹6,300 crore in April
Foreign portfolio investors remained bearish on Indian equities going by the net outflows of ₹6,300 crore so far this month (till April 26) amid concerns overMauritius Tax Treaty and US bond yield surge.
The geopolitical concerns arising from the Iran-Israel conflict also weighed on FPI interest in Indian equities despite the earnings growth of top Indian corporates being largely in line with expectations, said equity market experts.
Taken together with flows of previous months, the net FPI investments into Indian equities so far in 2024 stood at ₹4,589 crore, o§cial data with depositories showed.
The continued selling in equities in April 2024 comes at a time when the country is going through a seven-phased general election that began on April 19 and scheduled to end on June 1. Also, FPIs holding/ ownership of Indian stocks is currently at a decadal low of about 16.1 per cent.
This past week also saw the Indian volatility index — Nifty VIX — (which denotes volatility expectation) crackdown 20 per cent to around 10, setting the stage for an upswing in equities in the coming days, said analysts.
DEBT MARKET FLOWS
FPIs remained net sellers on the debt side too with outflows of ₹10,640 crore till April 26, data showed. However, despite the selling in April, FPIs’ total net investments into debt remained in the positive territory at ₹45,218 crore till April 26 this year.
FPIs had net sold equities worth ₹25,744 crore in January 2024 but made a reversal with net investments of ₹ 1539 crore and ₹35,098 crore in February and March 2024, respectively.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that the trigger for this renewed FPI selling, in both equity and debt, is the sustained rise in US bond yields. The 10-year bond yield now stands at around 4.7 per cent, which is attractive for foreign investors, he said.
The latest core CPI inflation in the US jumped to 3.7 per cent against the expectation of 3.4 per cent. This means the prospects of early rate cuts by the Fed are receding, he said. This will keep yields high, triggering more FPI outflows in both equity and debt, Vijayakumar added.
Ramesh K Vaidyanathan, Managing Partner at law firm BTG Advaya said that FPIs were somewhat spooked by the changes to the DTAA between India and Mauritius, with greater scrutiny applicable now on investments into India through Mauritius.
“I feel this is a temporary phenomenon and the domestic institutional investors and the HNIs will continue to drive the momentum in the Indian market, going forward. The macro factors also look good, with the ongoing elections signalling policy stability and large companies returning healthy earnings”, he said.
Sunil Damania, Chief Investment O§cer, MojoPMS, said there is a potential slowdown in FY25 FPI inflows after record investments in FY24, with current market valuations suggesting a subdued outlook.