Foreign Investors Pulled out Rs2.5 Lakh Crore in 8 Months, More Than They Invested in Past Many Years

IANS 26 May 2022

Investor Interest

Continuing its selling spree for the eighth consecutive month in May, foreign portfolio investors (FPIs) have pulled out around Rs2.5 lakh crore from the Indian equity market.

So far in 2022 itself, FPIs sold investments worth over Rs1.7 lakh crore, data available with National Securities Depository Limited (NSDL) showed.

With this recent slippage of investments out of India in these consecutive months in a row, FPIs have trimmed an amount over and above their entire portfolio created in the preceding seven to eight years. Overseas investors bought Rs2.2 lakh crore equities between 2014 and 2020 in the domestic stock market, Moneycontrol reported, quoting NSDL data.

Notably, the unprecedented FIIs (foreign institutional investors) sell off has been fuelled by soaring global inflation, the possibility of aggressive monetary tightening in India and other advanced countries including the US, fears of a recession in the US and the ongoing war in Ukraine.

There are strong possibilities of more policy rate hikes in the US in the coming monetary policy meets.

In India too, the Reserve Bank of India (RBI) is mulling further rate hikes, said its governor Shaktikanta Das earlier this week, but declined to mention by what percentage points.

Earlier this month, RBI's monetary policy committee (MPC), in an off-cycle review meeting, hiked the benchmark rates by 40bps to 4.4% owing to a high inflation at over 6% upper tolerance band for four months in a row. Mr Das said the move was taken to avoid a steep hike in June.

"Globally, risk aversion is high and markets may continue to be under pressure for some time. This, together with the rupee's depreciation versus the dollar, raises the possibility that FII outflows may continue in the short term," said Yesha Shah, head - equity research, Samco Securities.

From a more mid- to long-term perspective, given India's fundamental positioning and structural appeal among emerging economies, foreign investors are poised to make a comeback, Ms Shah added.

However, according to Manojh Vayalar, VP- equity derivatives at Religare Broking: "This (current trend) suggests that the net outflow in equity that we have been witnessing since the last 8-10 months is rather a profit booking than an hurried exit."

The money the foreign investors invested in the past 10 years, as per the index, has yielded them around 80% returns, Mr Vayalar said.

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Comments

User

Ramesh Popat

4 years ago

however, their overall total equity holding is down only about 4% down.
nasdeq is more than 25% down. further depreciating rupee, higher twin
deficit, lower gdp, inflation, rising intt. rates by rbi and fear of stagflation are serious
issues. disinvestment is slow. fed seems very aggressive in raising rates. if dii might not have
strentgth, our mkts woud have been down by 25% instead of around 15%.
The thrilling game is on and black swan ahead. If dii are out of liquidity, then real bears will
dance. Retail investors will be in big trouble.