Foreign investors have withdrawn Rs 44,396 crore from Indian equities this month, citing the strength of the dollar, rising bond yields in the US, and expectations of a weak earnings season.
This follows an investment of Rs 15,446 crore in December, data with the depositories showed. The continuing erosion in the Indian rupee is exerting enormous pressure on foreign investors, forcing them to withdraw their money from Indian equity markets,” said Associate Director—Manager Research, Morningstar Investment Advisers India.
Besides this, higher valuations of Indian equities, though after a recent correction, the expectation of a rather weak earnings season, and ambiguity surrounding the rhythm of economic growth are making them nervous, added he. According to data, foreign portfolio investors (FPIs) sold shares worth Rs 44,396 crore from Indian equities until January 17.
The principal reasons for the sustained selling of FPIs are the strength of the dollar and the rising bond yields in the US. With the dollar index above 109 and the 10-year US bond yield above 4.6 percent, it is logical for FPIs to sell in emerging markets, particularly in the most expensive emerging market, India,” V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
Since US bond yields are attractive, FPIs have also been sellers in the debt market. They withdrew Rs 4,848 crore from the debt general limit and Rs 6,176 crore from the debt voluntary retention route.
Vipul Bhowar, Senior Director of listed Investments at Waterfield Advisors, said that a cyclical improvement in corporate earnings coupled with stronger GDP growth driven by resilient domestic consumption and increased government spending on infrastructure projects could be the catalyst for a turnaround in FPI inflows into India.
