Markets last week suffered the worst FPI selling bout of 2024 calendar year

Foreign investors pulled Rs 18,600 crore out of Indian markets last week, the most in 2024, influenced by US economic factors and geopolitical tensions

The domestic markets last week witnessed the worst bout of selling by foreign portfolio investors (FPIs) this calendar year. During the four trading sessions ended April 18, FPIs pulled out Rs 18,600 crore, dragging the benchmark Nifty 50 down by 3.3 per cent. For context, monthly FPI-selling tally has been greater than this figure in only four calendar months since the start of 2023.

Last week’s high FPI selling figure was in the absence of any large block deals. It came amid global headwinds like strengthening of the US dollar and rising bond yields amid expectations of a rate cut by the US Federal Reserve getting pushed from June to December. From 4.2 per cent at the start of the month, the yield on the 10-year benchmark US Treasury swelled to nearly 4.7 per cent. “The hotter than expected US inflation and the consequent increase in bond yield has led to big selling in the cash market. Such a big selling takes place whenever US bond yields spike beyond expectations,” says VK Vijayakumar, chief investment strategist, Geojit Financial Services.

In the past too, FPIs have pulled out vehemently from emerging markets as US yields have hardened. Also, geopolitical uncertainties and rising hostilities between Israel and Iran have led to a flight of safety among investors. Even as sharp FPI outflows and market fall were seen ebbing on Friday, an uncertain environment, according to experts, means volatility will remain high in the near term. Until recently, traders were sanguine about market prospects as the India VIX, a gauge of volatility in the market, hit its 2024 low of 11.11 on April 10. It closed at 13.5 on Friday, indicating nervousness among market participants.