New Delhi: Foreign investors have net withdrawn over Rs 17,000 crore so far this month due to the attractiveness of Chinese markets and the cautious stance adopted by them ahead of the Union Budget and the US Federal Reserve meeting.
The outflow in January came after a net inflow of Rs 11,119 crore in December and Rs 36,239 crore in November. Overall, foreign portfolio investors (FPIs) pulled out Rs 1.21 lakh crore from Indian equity markets in 2022 following aggressive rate hikes by central banks globally, especially the US Federal Reserve, volatile crude oil, rising commodity prices and the Russia–Ukraine conflict.
For FPIs, 2022 was a weak year in terms of inflows and outflows from equities after net investment in the previous three years. According to the data available with the depositories, FPIs have made a net withdrawal of Rs 17,023 crore this month (till January 27).
Himanshu Srivastava, Associate Director-Manager Research, Morningstar India, said FPIs are taking a cautious approach as they are apprehensive ahead of the US Federal Reserve meeting on February 1 and the Union Budget.
The Fed’s Monetary Policy Committee will meet from January 31 to February 1. Also, FPIs are focusing on China since their markets reopened after the lockdown. Under its zero COVID policy, China was implementing a harsh lockdown to reduce the number of cases. As a result, Chinese markets declined, making them more attractive from a value perspective, Srivastava said.
This has led to FPIs shifting their focus from relatively higher rated economies like India to China, he said. Additionally, the weak global economic growth outlook has raised concerns about the US economy entering a recession, Srivastava said.
VK Vijayakumar, chief investment strategist, Geojit Financial Services, said the FPI strategy in January has been to sell in India and buy in relatively cheaper markets such as China, Hong Kong, South Korea and Thailand.
On the other hand, FPIs have invested Rs 3,685 crore in debt securities so far this month.
Apart from India, FPI inflows were also negative for Indonesia so far this month, while it was positive for Philippines, South Korea and Thailand.
Going forward, FPI flows into India are expected to remain volatile as market participants remain cautious ahead of the Union Budget next week, while Q3 FY22 earnings release, said Shrikant Chauhan, head of equity research (retail), Kotak Securities Ltd. The season failed to excite. ,