The Russia-Ukraine conflict has intensified selling by foreign institutional investors or FIIs from the Indian market. FIIs withdrew $1 billion a day for two consecutive sessions this week as worries over sanctions on energy major Russia pushed oil prices to fresh highs.
A rise in Brent prices to a fresh high of $139.13 per barrel on March 7 wrecked stock market sentiment due to concerns over inflationary pressures in the Indian economy. FIIs withdrew $0.98 billion (Rs 7,498.62 crore) from the Indian equity market in the same session.
The market had ended lower for the fourth straight session on March 7, with Sensex slipping 1,491 points to 52,842 and Nifty falling 382 points to 15,863.
The nervous sentiment in the Indian and global markets due to high oil prices forced FIIs to withdraw $1.029 billion or Rs 7291.23 crore from the equity market on March 8.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “FPIs continued to be sellers in March too. Up to 10th March FPIs sold equity worth Rs 41,935 crore through the stock exchanges. In CY 2022, up to March 10, FPIs have sold equity worth Rs 1,13,690 crore. The bulk of FPI flows to India are coming from emerging market funds.
FPIs fear that India would be impacted more by the commodity price hike, particularly crude spike since India is a major crude importer. FPI selling is mainly confined to financials and IT since these segments constitute the bulk of Assets under the Custody of FPIs. An important takeaway from FPI selling is that it is not impacting all segments. For instance, FPIs sold IT stocks worth Rs 10,984 crore in February, but in March IT is one of the best performing sectors.”
Russia started its military operations against Ukraine on February 24. Since then, foreign investors have withdrawn Rs 55,872 crore or $7.3 billion from the Indian market. The amount is nearly one-third of what has been sold since October 1 last year. In dollar terms, they have sold equities worth $19.82 billion since October 1.
The ongoing sell-off is the biggest since the global financial crisis in 2008- 2009. FIIs sold $15 billion worth of shares during that crisis, according to Ambit Asset Management.