Image for representational purpose only. , Photo Credit: Reuters
Foreign investors pulled out ₹28,852 crore from Indian equities in January, the worst outflow in the last seven months, mainly due to the attractiveness of Chinese markets.
This came after net inflows of Rs 11,119 crore in December and Rs 36,238 crore in November, data from the depositories showed.
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Going forward, foreign portfolio investment (FPI) flows are expected to remain volatile as Indian equities continue their massive underperformance compared to global markets, said Shrikant Chauhan, head of equity research (retail), Kotak Securities.
According to the data, FPIs pulled out a net Rs 28,852 crore from equities in January. This was also the biggest monthly withdrawal by FPIs since June 2022, when they pulled out ₹50,203 crore from equities.
There was a net outflow of over ₹5,700 crore from equities in the first week of February, following outflows in January.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said FPIs are selling in India and buying in cheaper markets like China, Hong Kong and South Korea where valuations are attractive.
“Indian markets have underperformed so far this year because of this ‘short India and long other cheap markets’ strategy,” he added.
While China, Hong Kong and South Korea are up 4.71%, 7.52% and 11.45% respectively so far this year, India is down 1.89%, Mr Vijayakumar said, adding that such poor performance is unlikely to last for long.
Himanshu Srivastava, Associate Director-Manager Research, Morningstar India, said that FPIs have adopted a cautious approach towards Indian equities. union budget and the meeting of the US Federal Reserve. Interestingly, both turned out to be positive indicators.
“The quarterly percentage point rate hike by the US Fed signaled a decline in the quantum of rate hikes. The Union Budget was also positive and focused on infrastructure and economic growth,” he added.
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However, these two factors did not lift the sentiment in a big way. Sharp selling in Adani group companies Shares took the market into a tailspin.
Besides, apprehensions that Adani might hit lenders weighed on banking stocks. However, the Reserve Bank of India’s message that the Indian banking system is healthy and the late rally in banking stocks led to an improvement in sentiment.
On the other hand, FPIs have invested Rs 3,531 crore in the debt markets during the period under review.