FPIs withdraw almost ₹44,400cr from Indian equities in January
What's the story
Foreign portfolio investors (FPIs) have pulled out a staggering ₹44,396 crore from Indian equities this month till January 17.
The trend is attributed to the strengthening US Dollar, rising bond yields in the US, and an anticipated weak earnings season.
The data shows a reversal from December 2024 when these investors had infused ₹15,446 crore into the market.
Market dynamics
INR's depreciation and high valuations influence investor sentiment
The continuous depreciation of the Indian Rupee is putting a lot of pressure on foreign investors, said Himanshu Srivastava of Morningstar Investment Advisers India.
He said this is forcing them to pull out their investments from the Indian equity markets.
Further, despite recent corrections, the high valuation of Indian equities and uncertainty over economic growth pace are also contributing factors to this trend.
Debt market
FPIs also withdraw from Indian debt market
FPIs have been sellers not just in the equity market but also in the debt market, attracted by US bond yields.
They have pulled out ₹4,848 crore from the debt general limit and another ₹6,176 crore through the debt voluntary retention route.
This highlights a wider trend of foreign investment withdrawal from Indian markets.
Market outlook
Potential turnaround in FPI flows into India
Vipul Bhowar of Waterfield Advisors suggests that a cyclical improvement in corporate earnings, stronger GDP growth driven by robust domestic consumption, and higher government spending on infrastructure projects, could potentially reverse this trend.
This comes as foreign investors adopted a cautious approach last year, scaling back investments in Indian equities significantly.