Mumbai: Net Foreign Fund flow away India has crossed the Rs 2 lakh crore mark in 2022, the highest ever annual figure and more than double the previous high of Rs 80,917 crore recorded in 2018. Overall, over 90%, or about Rs 1.9 lakh crore, was on account of selloff by foreign portfolio investors (FPI) stock market data CDSL has shown.
Galloping inflation, rising current account deficit, a weak currency and the US Fed’s decision to raise rates too sharply in the world’s largest economy have pushed foreign fund managers to India, analysts and brokers said. on Wednesday, Rupee It closed at a record low of 78.07, down 7 paise against the dollar.
June is the ninth consecutive month that FPIs have been net sellers in India, taking a total of around Rs 2.5 lakh crore during the period. Official data shows that in just 15 days so far this month, FPIs have net sold stocks worth around Rs 25,000 crore. On Wednesday too, there were net sellers of Rs 3,531 crore in the FPI market. This data will be included in the figures to be reported on Thursday.
According to a leading debt fund manager, FPI The outflow could continue for a few more months, at least until it becomes clear how far the US Fed will proceed to bolster liquidity in the US.
US Fed Chairman Jerome Powell has hinted at raising rates very quickly and aggressively to contain inflation. The Fed has also said that it will reduce the size of its balance sheet by $95 billion per month. Since the COVID pandemic began in early 2020, the US central bank has been buying bonds from the market and infusing money into the system in return. Now given that retail inflation in the US is at a 41-year high, the Fed has stopped buying bonds as well as raising rates. Further, from the beginning of this month, it has started selling bonds already held with it.
“The world will, for the first time, face the Fed’s active balance sheet reduction program. This is completely unknown territory and no one knows what it will hold for global markets. The increase in the amount of money and the increase in government yields along with the depreciation of the rupee has made the fund costlier, with FPI fund managers taking money from India.”
There may also be a silver lining. Prashant Jain of HDFC MFMUMBAI, which manages over Rs 90,000 crore of investor money across three funds, on Tuesday told investors, fund distributors and others that it thinks the current strong selling by FPIs may slow in the next six months, Given that these funds have already sold a large amount of stock in India. “FII sales should come down in the next 1-2 quarters or earlier. Uncertainty may be witnessed in the next 3-6 months, but after that, some of the risks will be clarified,” Jain said in a web-conference during HDFC MF’s mid-year review of the Indian economy and markets.
Galloping inflation, rising current account deficit, a weak currency and the US Fed’s decision to raise rates too sharply in the world’s largest economy have pushed foreign fund managers to India, analysts and brokers said. on Wednesday, Rupee It closed at a record low of 78.07, down 7 paise against the dollar.
June is the ninth consecutive month that FPIs have been net sellers in India, taking a total of around Rs 2.5 lakh crore during the period. Official data shows that in just 15 days so far this month, FPIs have net sold stocks worth around Rs 25,000 crore. On Wednesday too, there were net sellers of Rs 3,531 crore in the FPI market. This data will be included in the figures to be reported on Thursday.
According to a leading debt fund manager, FPI The outflow could continue for a few more months, at least until it becomes clear how far the US Fed will proceed to bolster liquidity in the US.
US Fed Chairman Jerome Powell has hinted at raising rates very quickly and aggressively to contain inflation. The Fed has also said that it will reduce the size of its balance sheet by $95 billion per month. Since the COVID pandemic began in early 2020, the US central bank has been buying bonds from the market and infusing money into the system in return. Now given that retail inflation in the US is at a 41-year high, the Fed has stopped buying bonds as well as raising rates. Further, from the beginning of this month, it has started selling bonds already held with it.
“The world will, for the first time, face the Fed’s active balance sheet reduction program. This is completely unknown territory and no one knows what it will hold for global markets. The increase in the amount of money and the increase in government yields along with the depreciation of the rupee has made the fund costlier, with FPI fund managers taking money from India.”
There may also be a silver lining. Prashant Jain of HDFC MFMUMBAI, which manages over Rs 90,000 crore of investor money across three funds, on Tuesday told investors, fund distributors and others that it thinks the current strong selling by FPIs may slow in the next six months, Given that these funds have already sold a large amount of stock in India. “FII sales should come down in the next 1-2 quarters or earlier. Uncertainty may be witnessed in the next 3-6 months, but after that, some of the risks will be clarified,” Jain said in a web-conference during HDFC MF’s mid-year review of the Indian economy and markets.