“Since valuations remain high even after the recent pullback and US bond yields are attractive (the US 10-year bond yield is around 4.49 per cent) FPIs are likely to press sales so long as this trend persists,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said
New Delhi:
Foreign Portfolio Investors (FPIs) have pulled out over Rs 10,000 crore from Indian equities in the first three weeks of September, primarily due to rising US interest rates, recessionary fears, and overvalued domestic stocks.
Before the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and brought in Rs 1.74 trillion during the period.
Mayank Mehra, smallcase, manager and principal partner at Craving Alpha,believes that strong economic growth prospects, attractive valuations, and government reforms could support foreign investment flows in the next month.
“Since valuations remain high even after the recent pullback and US bond yields are attractive (the US 10-year bond yield is around 4.49 per cent) FPIs are likely to press sales so long as this trend persists,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
According to the data with depositories, in the 15 trading days, so far in September, FPIs were sellers in 11 days with a net withdrawal of Rs 10,164 crore.
This figure includes bulk deals and investments through the primary market.
Of the total pullout of Rs 10,164 crore so far this month (till September 22), over Rs 4,700 crore was withdrawn in the last week alone.
The latest outflow came after FPI investment in equities hit a four-month low of Rs 12,262 crore in August.
FPI flows have displayed a subdued pattern over the past few weeks. This hesitancy among investors can be attributed to growing apprehensions about inflation and the interest rate landscape, particularly in the US, coupled with uncertainties regarding global economic growth, Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said.
As a result, investors have turned cautious and adopted a “wait and watch” approach when considering investments in emerging markets like India, he added.
“Higher oil prices and elevated US yields are keeping the FPIs on the defensive, however, we infer that stable economic growth in India vis–vis China and other emerging markets (EMs) will draw FPIs back to the Indian equities,” Hitesh Jain, Strategist Institutional Equities Research at YES Securities India said.
On the other hand, FPIs invested Rs 295 crore in the country’s debt market during the period under review.
With this, the total investment by FPIs in equity has reached Rs 1.25 lakh crore and close to Rs 28,476 crore in the debt market this year so far.
The sectoral data revealed that as of September 15, mining, power, services, oil, and telecommunication registered the highest outflows, and sectors such as financial services, capital foods, consumer services, IT, and realty attracted cumulative buying.
The markets were in a sharp correction mode in the week gone by. The saving grace was that we had a holiday on Tuesday to welcome Lord Ganesh for his annual trip, otherwise things could have been even worse.
Markets lost on all four days of the week. BSE SENSEX lost 1,829.48 points or 2.70 per cent to close at 66,009.15 points while NIFTY lost 518.10 points or 2.57 per cent to close at 19,674.25 points.
The broader markets saw BSE100, BSE200 and BSE500 lose 2.51 per cent, 2.37 per cent and 2.33 per cent respectively. BSEMIDCAP lost 1.71 per cent while BSESMALLCAP was down 2.04 per cent.
Markets saw many stocks register big losses. Amongst the benchmark indices, HDFC Bank lost Rs 133 or 8 per cent to close at Rs 1,529 while Reliance lost Rs 106 or 4.31 per cent to close at Rs 2,354. These two stocks broke the momentum and sentiment of markets as HDFC Bank’s fall hit Bank NIFTY badly.
Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services, said “We expect the market to remain under pressure in the near term given the global concerns. Thus, we suggest investors to have higher allocation towards defensive and large-caps.”
Investors would look for economic data like US & UK GDP numbers, EU inflation, US & China Manufacturing PMI, and India’s Infrastructure output which is due next week for further direction.
Nagaraj Shetti, Technical Research Analyst, HDFC Securities said the downside momentum continued in the market for the fourth consecutive sessions on Friday and Nifty closed the day lower by 68 points amidst volatility.
After opening with a flat note, the market made an attempt to move up in the early part of the session. It later showed volatile intraday swing moves on either side and finally closed near the lows.