”Geopolitical tension and chances of a rate hike by US Fed have triggered outflows from FPIs in the recent times from the Indian equity markets. They sharply increased the pace of selling after the US Fed indicated an end of the ultra-loose monetary policy regime,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India
New Delhi:
Foreign portfolio investors (FPIs) have withdrawn a net Rs 18,856 crore from the Indian markets in February so far amid geopolitical tensions and chances of a rate hike by the US Federal Reserve.
As per depositories data, overseas investors took out Rs 15,342 crore from equities and Rs 3,629 crore from the bonds market between February 1-18. At the same time, they invested Rs 115 crore in hybrid instruments.
This translates into a net outflow of Rs 18,856 crore during the period under review. This is the fifth consecutive month of foreign fund outflows.
”Geopolitical tension and chances of a rate hike by US Fed have triggered outflows from FPIs in the recent times from the Indian equity markets. They sharply increased the pace of selling after the US Fed indicated an end of the ultra-loose monetary policy regime,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.
Shrikant Chouhan, Head – Equity Research (Retail), Kotak Securities, said investors shifted to defensive sectors and safe havens such as bonds and gold as tensions flared between the US and Russia over Ukraine.
”FPIs net outflow from Indian equity in last one year is close to USD 8 billion. This figure is the highest since 2009. In February to date, FIIs have sold worth approx Rs 17,500 crore. The FPI view of India is that India has already considered earnings growth of 16-18 percent CAGR for FY23 and FY24, based on expectations of earnings and economic growth cycle…
”Yet these estimates don’t account for risks of the rising cost of capital in the US (India’s cost of capital is linked to US cost of capital) and therefore PE contraction potential, nor of inflation risk hurting earnings growth estimates,” said Rajesh Bhatia, MD, and CIO, ITI Long Short Equity Fund.
FPIs can be expected to sell more going forward unless market corrections make valuations attractive, said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Domestic institutional investors and HNIs are slowly accumulating high-quality financials whose valuations have turned attractive due to sustained FPI selling, he added.
Five of the 10 most valued firms together added Rs 85,712.56 crore in market valuation last week, with Tata Consultancy Services (TCS) emerging as the biggest gainer.
Domestic stock markets may face volatile trading sessions this week
Domestic stock markets may face volatile trading sessions this week and would be guided by global cues, movement of the rupee and crude oil prices, experts said.
Participants would be keenly tracking the geopolitical developments regarding Russia-Ukraine tensions, which have been weighing on global sentiment for the past few weeks.
“Volatility is expected to remain high next week as well, given the crucial meeting between the US and Russia. Inflationary concern, continuous FIIs selling and monthly F&O expiry could add to the volatility next week,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.
Ukrainian President Volodymyr Zelenskyy has called for Russian President Vladimir Putin to meet him and seek resolution to the crisis.
Geopolitical tensions and chances of a rate hike by the US Federal Reserve have triggered foreign fund outflows from the Indian equity markets.
“Going forward, investors would be watchful of the outcome of US Federal Reserve policy in March and Russia-Ukraine conflict.
“Crude is on an uptrend and trajectory of crude prices along with inflation in India and globally and the pace of earnings growth in India would be the key factors to watch out for,” said Shibani Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company.
On the domestic front, the ongoing assembly polls in Uttar Pradesh, Uttarakhand, Goa, Punjab and Manipur will also be closely watched, experts said.
Trend in the Indian currency and crude oil prices would continue to influence trading sentiments, they added.
On Friday, the BSE Sensex closed 59.04 points or 0.10 per cent lower at 57,832.97. The NSE Nifty edged lower by 28.30 points or 0.16 per cent to settle at 17,276.30.
On a weekly basis, the Sensex lost 319.95 points or 0.55 per cent and the Nifty fell 98.45 points or 0.56 per cent.
According to Milind Muchhala, Executive Director, Julius Baer India, the uncertainty related to Fed action, and the increasing expectations of a 50 bps rate hike in the March policy amidst a persistently high inflation print, has been plaguing the markets.