Foreign portfolio investors (FPIs) have withdrawn over Rs 6,400 crore from the Indian stock markets in the first four trading sessions of the current month i.e. May. Last week, the Reserve Bank of India and the US central bank Federal Reserve hiked interest rates, which has affected the trend of FPIs. “High crude oil prices, monetary Due to tightening of stance and other factors, FPI inflows will remain volatile in the near future.
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For seven consecutive months till April 2022, FPIs have been net sellers in the Indian markets and have withdrawn over Rs 1.65 lakh crore from equities. The main reason for this has been the deteriorating geopolitical situation amid fears of an interest rate hike by the US central bank. FPIs had invested Rs 7,707 crore in the Indian stock markets in the first week of April after selling for six consecutive months. Since then they have been selling continuously. Their selloff started in the week of low trading sessions from April 11 to 13 and continued in the weeks ahead. According to depository data, FPIs sold shares worth Rs 6,417 crore during May 2-6. On May 3, the markets were closed on Eid.
Vijay Singhania, Chairman, TradeSmart said, “Central banks across the world are increasing interest rates, which is having an impact on the stock markets. Due to this, FPIs are also selling ‘indiscriminately’. On May 4, the Reserve Bank suddenly increased the repo rate by 0.4 percent. Apart from this, the cash reserve ratio (CRR) has also been increased by half a percent, which will be applicable from May 21. Srivastava said that this move of the Reserve Bank caused a tremendous reaction in the market and since then it has been coming down continuously.
On the same day, the Federal Reserve also increased interest rates by half a percentage point. This is the highest increase in interest rates in two decades. Srivastava said that this has created apprehension that there may be a further increase in interest rates going forward. Not only this, the Bank of England has also raised its key rates to their all-time high since 2009. Apart from equities, FPIs have also pulled out Rs 1,085 crore from the debt or bond market during the period under review. Singhania said that this trend will continue in the future as well and selling by foreign investors may continue.