FPIs withdrew ₹6,300 crore from Indian equities in April

FPIs withdrew ₹6,300 crore from Indian equities in April
28 Apr 2024

Foreign Portfolio Investors (FPIs) have withdrawn ₹6,300 crore from Indian equities in April, according to depository data.

This move is largely due to concerns over changes in India's tax treaty with Mauritius, and a consistent rise in US bond yields.

The withdrawal follows a significant net investment of ₹35,098 crore in March and ₹1,539 crore in February.

As of April 26, the net outflow of foreign investment from Indian equities stood at ₹6,304 crore.

US bond yields have triggered renewed FPI selling
Impact

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated that the continuous rise in US bond yields, has triggered renewed FPI selling in equity and debt markets.

He pointed out that the current 10-year bond yield is approximately 4.7%, a rate highly attractive to foreign investors.

This shift is seen as a significant factor influencing the recent withdrawal of FPIs from Indian equities.

Weak global market signals negatively impacted equities
Investor concerns

Himanshu Srivastava, Associate Director - Manager Research at Morningstar Investment Research India, highlighted that alterations in India's tax treaty with Mauritius continue to unsettle foreign investors.

He added that weak global market signals and an uncertain macroeconomic and interest rate outlook, have negatively impacted emerging market equities.

Srivastava also mentioned that a rise in commodity prices, particularly oil, and increased US retail inflation, have reduced expectations of an early rate cut by the US Federal Reserve.

DIIs, HNIs, and retail investors counterbalance all FPI selling
Market resilience

Despite the outflows, domestic institutional investors (DIIs), High Networth Individuals (HNIs), and retail investors have managed to counterbalance all FPI selling in the equity markets.

This absorption could potentially deter further FPI selling.

Additionally, FPIs have also withdrawn ₹10,640 crore from the debt market during this period.

This follows foreign investors' investment of ₹13,602 crore in March, ₹22,419 crore in February, and ₹19,836 crore in January.