Flowing out 1.4 trillion rupees, stock market sees worst selling by foreign investment institutions in fiscal year 22

Foreign portfolio investors dumped Indian stocks with a record value of Rs 1.4 thousand crore in the 2021-22 fiscal year, after injecting Rs 2.7 crore in the previous fiscal year, mainly due to a sharp rise in coronavirus cases, and concerns about the risks of economic recovery and global unrest caused by the Russo-Ukrainian war.

This was the worst exit ever by foreign portfolio investors (FPI) from the domestic stock market. The data with the warehouses showed that they withdrew Rs 88 crore in 2018-19, Rs 14,171 crore in 2015-16 and Rs 47,706 crore in 2008-09.

Moreover, experts believe that flows from FPIs are expected to remain volatile in the near term due to headwinds in terms of higher crude oil prices and inflation.

From April 2021 to March 2022, FPIs were net sellers in Indian stocks to the tune of Rs 1.4 crore. They pulled nine months out of the twelve in the just-ended fiscal year. They have been selling local stocks since October 2021.

Himanshu Srivastava, Associate Director – Director of Research, Morningstar India, said several factors had triggered the influx of FPIs in the previous fiscal year, which included the sharp rise in coronavirus cases during April-May 2021, the peak period of the second wave of World War II. the second. COVID-19 pandemic.

“The sudden and sharp rise in the coronavirus pandemic in the country and its ferocity surprised foreign investors, who until then had been comfortably navigating in anticipation of a quick economic recovery. Moreover, the daily number of COVID-19 cases exceeded 4-lakh in May, and concerns became The risks to the economic recovery are more pronounced with the closures imposed in several states to contain the spread of the virus, and these factors have terrified foreign investors.

Overall, primary financial institutions started FY21-22 negative and empty shares worth Rs 12,613 crore during April-May 2021 period. However, the scenario started to improve in mid-May as the day-to-day issues load started to trend downward.

Foreign investors came back in June and made a net investment of Rs 17,215 crore on the back of continuously declining coronavirus cases in the country. Most states have begun easing lockdowns, which bodes well for a rebound in business.

Apart from these factors, good quarterly results and positive earnings growth outlook over the long-term interest of FIIs equipped with fuel in Indian stocks. Besides, the recovery in the vaccination campaign boosted investor sentiment and raised expectations that the second wave will have a limited impact on the country’s economy.

However, due to the upbeat mood in June, FPI turned into net sellers in July as they withdrew Rs.11,308 crore per month on the back of a hawkish US Federal Reserve statement that it may raise rates much earlier than expected. Moreover, rising valuations, higher oil prices and a firm US dollar made them fear the risks in the near term.

They were back in equities in August, and the positive momentum continued in September as well in terms of improving macro environment and positive outlook. This was also driven by expectations that with the pace of vaccination accelerating and a significant portion of the population receiving vaccinations, the economy would improve and soon be back on track.

However, the pace of foreign investment inflows in the footnotes could not continue with the trend reversal in October and the net drawdown continued until March 2022 due to the uncertainty on the global and domestic fronts.

The spread of transmissible Omicron type of coronavirus in India as well as other parts of the world has become a cause for concern. Besides, the expectation of an interest rate hike by the US Federal Reserve and the deteriorating geopolitical environment amid the Russo-Ukrainian war have affected the flow of FPIs, Srivastava added.

According to Nikhil Kamath, Co-Founder, True Beacon and Zerodha, India looks expensive on a relative basis, and foreign investment institutions can rebalance China and other opportunities by reducing their exposure to India.

Atanuu Agarrwal, co-founder of UpsideAI, said the main reason for the outflow remains the changing interest rate environment and the Fed’s signal to end stimulus.

“There are several other reasons – India is too expensive, Crude Oil is up, INR is weak, conflict between Russia and Ukraine leads to escape to safety. But all things being equal, if the Fed signaled a delay in raising rates, we haven’t seen a sell-off. of this size.”

On the other hand, foreign investors made a net investment of Rs 1,628 crore in debt markets in 2021-22. This comes after a net outflow of Rs 50,443 crore in the previous financial year.

(The title and image for this report may have been reformulated only by the Business Standard staff; the rest of the content is automatically generated from a shared feed.)

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