There is polarisation among sectors with IT and healthcare receiving the lion's share of FPI money in the past two quarters.
Experts believe FPIs will keep a close watch on coronavirus pandemic, its spread and likely impact on the economy while making decisions about investment into India.
Foreign investors have pulled over Rs 6,400 crore from the Indian equity market in the first four trading sessions of the ongoing month when the Reserve Bank of India (RBI) and US Federal Reserve raised interest rates. Given the headwinds in terms of elevated crude prices, inflation, tight monetary policy among others, FPIs' flows in India are expected to remain volatile in the near term, Shrikant Chouhan, Head - Equity Research (Retail), Kotak Securities, said. Foreign Portfolio Investors (FPIs) remained net sellers for seven months to April 2022, withdrawing a massive amount of over Rs 1.65 lakh crore from equities. This was largely on the back of anticipation of a rate hike by the US Federal Reserve and due to the deteriorating geopolitical environment following Russia's invasion of Ukraine.
The uncertainty over the gravity of the pandemic's impact on the global economy and financial markets worldwide triggered a flight to safety among foreign investors as they rushed to exit from relatively riskier investment destinations, such as emerging markets like India, a report said.
Foreign portfolio investors (FPIs) and mutual funds (MFs) have put in more money as anchor investors in initial public offerings (IPOs) in 2021 than any other year. FPIs' share of investments for the year stood at Rs 24,477 crore, nearly six times that put in last year and more than nine times the amount invested in 2019, the data from Prime Database showed. MFs have invested Rs 12,264 crore, four times than that invested last year and more than 10 times the investment in 2019. The total investment by FPIs and MFs put together this year is five times the amount invested last year. The amount contributed by MFs, however, is nearly half of that invested by FPIs.
'The potential headwind is that the Indian economy is likely to see a slowdown in growth rates over the next two years.'
Domestic mutual funds (MFs) and foreign portfolio investors (FPIs) have been net buyers of stocks in August. Domestic fund houses have continued to invest in stocks, propelled by the success of various new fund offers (NFOs) and strong flows into equity funds. MFs had purchased stocks worth more than Rs 8,300 crore until August 23, according to the data provided on the Securities and Exchange Board of India (Sebi) website. Jimmy Patel, MD and CEO at Quantum AMC, says: "The surge in equity investments by MFs is because of two key reasons. One, equity NFOs are getting a strong response from investors, and fund houses need to deploy that money in the markets.
'The good news is that money continues to flow into India-focussed offshore funds.'
It does feel like we are close to the end of the rupee's rally, says Jamal Mecklai.
If net forex outflows turn out to be relatively high in the next few years, the rupee could depreciate beyond Rs 80 to a dollar by 2022. The causal reasons could, for example, include unmet expectations of FPI and FDI investors about the performance of the Indian economy, sharp rise in prices of imported oil and decrease in FX remittances. The RBI has to ask itself whether guaranteeing future rupee-dollar exchange rates on FX forward contracts is a reasonable way to use its risk-bearing capacity, says Jaimini Bhagwati.
Experts say foreign investor sentiment was bolstered by the US Federal Reserve's decision to go slow with interest rate hikes and hopes of political stability.
Given the concerns around trade wars that threaten to jeopardise global capital flows as well, attracting foreign capital needs to be a policy priority, says Neelkanth Mishra.
The new PN3 norms and lack of clarity on what constitutes beneficial ownership are the primary reasons for the decline in investments from China and Hong Kong.
'Today, there is no easy money to be made after the run-up in equities.'
Due to tax associations with the fiscal-ending, April is a month of SIP renewal. So, the April numbers will be important and may perhaps, mark a change in retail attitude.
Continued outflows amid moderation of domestic investments are a concern
As yields rise, bond prices fall. Higher yields not only translate into losses for investors, it also pushes up borrowing cost for companies as well as government
The broader Nifty too fell for the second straight session and closed with a loss of over 62 points, or 0.54 per cent, at 11,520.30, after hovering between 11,496.85 and 11,602.55.
Central bank moves to infuse liquidity into bond market to help boost sentiment.
The new norms provide an operational framework for FPIs, a new class of overseas investors that club all existing class of investors like foreign institutional investors and Qualified Foreign Investors.
Market experts on why the bulls will be on the rampage first thing on Monday after the scrapping of enhanced surcharge on FPIs and other measures to ease the systemic liquidity squeeze and boost demand. Prasanna D Zore reports.
'Everybody fears them and rightly so. Who in his right senses wouldn't fear these agencies?' 'They can take away everything in seconds with near zero recourse to law.'
Indian economy was growing faster than the global average and all other major economies: FM
FPIs, which are holding large exposures in Indian debt, could also be expected to book some capital gains as yields slide down
The 30-share Sensex ended down 604 points at 28,845 and the 50-share Nifty ended down 181 points at 8,757. The Bank Nifty ended down 602 points at 19,146.
