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Foreign Portfolio Investors (FPIs) have been consistently selling their holdings in the Indian stock markets.
According to data from the National Securities Depository Limited (NSDL), FPIs sold equities worth Rs 19,759 crore during the week from January 20 to January 24. The data further revealed that in January alone, FPIs have pulled out Rs 64,156 crore from Indian markets. This persistent selling is largely attributed to the return of Donald Trump to the political stage in the United States, which has boosted investor confidence in the US economy. The positive sentiment surrounding Trump's leadership and his efforts to improve the average American's life have made the US a more attractive destination for investments. The shift of funds back to the US is also supported by rising interest rates on US treasury bonds and a strengthening US dollar. These factors have created an appealing environment for global investors, prompting them to withdraw from emerging markets like India. This large-scale outflow of funds has had a significant impact on the Indian rupee, which has weakened against the dollar. The depreciation of the rupee has further fuelled FPI outflows, creating a cycle of persistent selling in Indian markets. Higher valuations in Indian markets, coupled with slowing earnings growth, have also deterred foreign investors. Akshay Chinchalkar, Head of Research, Axis Securities told ANI "On a ytd basis, foreigners have withdrawn close to $7B. Higher valuations within the region despite slowing earnings, Trump getting a second term and his efforts to improve the life of the average American, US treasury bonds offering attractive interest rates and a rising dollar are the most important reasons why money is flowing back into the US at the expense of the Indian investor". The consistent selling by FPIs not only impacts the Indian stock market but also raises concerns about the broader economic outlook. As global factors continue to influence investor behavior, market participants in India are keeping a close watch on developments in the US and other major economies. However, the data for the last month, December, highlighted that net investment by FPIs in Indian equities stood positive, with a net investment of Rs 15,446 crore. The year 2024 marked a positive ending, but the net buying value in Indian equities by FPIs drastically reduced, declining to Rs 427 crore. The country experienced a drastic drop in Foreign Portfolio Investment (FPI) inflows in 2024, with net investments falling by 99 per cent compared to the previous year. One of the primary reasons for this decline was the dominance of the US economy in the global markets. The FPI outflows highlight the challenges faced by emerging markets in attracting foreign capital amidst global uncertainties. (ANI)
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