FPIs pulled out nearly Rs 40,000 cr last month

NEW DELHI: Continuing its heavy selling spree for the eighth consecutive month, foreign investors pulled out nearly Rs 40,000 cr from the Indian equity market in May on fears of an aggressive rate hike by US Federal Reserve that dented investor sentiments.

With this, net outflow by foreign portfolio investors (FPIs) from equities reached at Rs 1.69 lakh crore so far in 2022, data with depositories showed. Going ahead, FPI flows will remain volatile in the emerging markets on account of rising geo-political risk, rising inflation, tightening of monetary policy by central banks, among others, Shrikant Chouhan, Head - Equity Research (Retail), Kotak Securities said.

As per the data, foreign investors withdrew a net amount of Rs 39,993 crore from equities in May. This massive outflow is the major factor for the weakness in the Indian market. Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, attributed the latest sell-off to concerns over the prospects of more aggressive rate hike by US Fed going ahead.

US Fed has hiked rates twice this year to battle surging inflation caused by the disruption in supply chain due to the war between Russia and Ukraine. “Additionally, there are concerns of uncertainty on the ongoing military conflict between Russia and Ukraine which is impacting the crude prices. Globally, the rate hikes by US Federal Reserve, tightening of monetary policy by the global central banks and appreciation of the foreign currency dollar rate has triggered the offshore investors to offload the equities from sensitive markets,” said Manoj Purohit, Partner & Leader – Financial Services Tax, BDO India.

Foreign investors have been taking out money from equities in the last eight months (from October 2021 to May 2022), withdrawing a massive net amount of Rs 2.07 lakh crore.

But, there are signs of FPI selling exhaustion. In the early days of June, FPI selling is in small amounts, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

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