FPIs turn net sellers; withdraw Rs 4,200 cr in equities in Sept so far

After six months of consistent buying, foreign portfolio investors (FPIs) have turned net sellers to pull out Rs 4,200 crore from equities in September, so far, on rising US bond yields, a stronger dollar and concerns over global economic growth.

The outflow of foreign portfolio money could continue in the coming week or two, Nitasha Shankar, Chief Investment Advisor, YES Securities (India) Ltd, said.

"We also need to keep an eye on the sharp volatility in the rupee, which could impact FPI flows going ahead," he added.

According to the data with the depositories, foreign portfolio investors (FPIs) pulled out a net sum of Rs 4,203 crore from the equities, so far, this month (till September 8).

This came after FPI investment in equities had hit a four-month low of Rs 12,262 crore in August.

Before the latest outflow, FPIs were incessantly buying Indian equities in the last six months -- from March to August -- and brought in Rs 1.74 lakh crore during the period.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed the reversal in trend in September to the rising US bond yields and the uptrend in the dollar index.

Shankar said the main reasons for the outflow can be attributed to a stronger dollar as the Dollar index continued its strong upward momentum and the rising US 10-year treasury bond yields, touching a 15-year high in the week gone by.

"The net outflow was mainly due to uncertainties surrounding the global interest rate landscape, particularly in the United States, and concerns regarding global economic growth," Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said.

These concerns stem from broader global macroeconomic factors, including surging crude oil prices and the reemergence of inflation risks, he said.

He further said that worries about an impending interest rate hike in the US and its potential impact on the global economy have made investors more cautious, prompting them to adopt a "wait-and-watch" approach.

Apart from equities, FPIs invested Rs 643 crore in the country's debt market during the period under review.

With this, the total investment by FPIs in equity has reached Rs 1.31 lakh crore and close to Rs 28,825 crore in the debt market this year, so far.

In terms of sectors, FPIs have been consistently buying capital goods and power. However, FPI selling in financials is keeping the prices of the banking blue chips low.

Geojit's Vijayakumar said that FPIs can be expected to turn buyers, when the dollar index and US bond yields decline, which, in turn, will depend on the incoming US inflation and growth data.