Changes in the attitude of the US Federal Reserve (US Fed) have led to changes in the attitude of foreign portfolio investors (FPIs). The US Fed has started tapering its monthly bond-buying programme by 15 per cent a month, and has hinted at a rate hike in the first half of calendar year 2022 (CY22). The dollar has hardened, and tighter money supply has made FPIs cautious.
The FPIs have sold Rs 19,500 crore worth of Indian equity since October 1, and they are net sellers to the tune of Rs 10,965 crore in FY22 (until November 30). The rupee has fallen a little (less than 1 per cent) in the last two months.
Several FPIs have issued advisories stating that India is very highly-valued and they will cut exposure. Historically, FPIs have cut back on December exposure simply because of the Christmas break and financial year end for some FPIs.
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