Foreign portfolio investors (FPIs) have withdrawn Rs 325 crore from Indian equities in the first week of this month, signalling a cautious approach amid relatively high valuations and the upcoming general elections. This net outflow follows massive investments of Rs 35,000 crore in March and Rs 1,539 crore in February, as indicated by data from the depositories.
The surge in the US 10-year yield to 4.4 percent has the potential to impact FPI investment flows into India in the near term, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. However, despite the rise in US bond yields, FPI selling is expected to remain limited due to the bullish Indian stock market, which has been consistently setting new records.
Krishna Appala, Senior Research Analyst at Capitalmind, suggests that FPIs might return post-elections or upon early signs of a US Federal Reserve rate reduction.
FPIs withdrew Rs 325 crore from Indian equities in the current month (till April 5), demonstrating caution in the face of relatively high valuations and the impending general elections, as stated by Appala.
On the other hand, FPIs made a net investment of Rs 1,215 crore in the debt market during the same period.
The attractive combination of the Indian government securities (G-Sec) 10-year yield at 7.1 percent and the US 10-year yield at 4.3 percent is prompting FPIs to shift their focus from equities to bond instruments in the US and India, which offer higher yields.
In terms of sector-wise investments, FPIs have been selling in the FMCG segment while showing interest in the telecom and realty sectors.
Overall, this year has witnessed an inflow of over Rs 10,500 crore in equities and more than Rs 57,000 crore in the debt market.
