Overseas investors have pulled out a net Rs 18,856 crore from the Indian markets in the month of February so far amid geopolitical tensions and the possibility of a rate increase by the US Federal Reserve.
Foreign Portfolio Investors (FPIs) took out Rs 15,342 crore from equities and Rs 3,629 crore from the bonds market between February 1-18, according to depositories data. Simultaneously, they pumped in Rs 115 crore in hybrid instruments.
This translates into a net outflow of Rs 18,856 crore during the said period, making February the fifth successive month of foreign fund outflows.
Also Read: FPIs net sellers in first half of Feb; pull out Rs 14,935 cr
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, told PTI that geopolitical tension and chances of a rate hike by the US Fed have prompted outflows from FPIs in 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,” he added.
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.
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“FPIs net outflow from Indian equity in last one year is close to $8 billion. This figure is the highest since 2009. In February till 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 per cent CAGR for FY23 and FY24, based on expectations of earnings and economic growth cycle…
“Yet these estimates don’t account for risks of 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.
(With inputs from PTI.)