foreign investors
The process of selling by foreign investors shows no signs of ending. After the big selloff in 2024, it seemed that the situation would improve in the new year but this does not seem to be happening. Foreign investors have sold shares worth Rs 44,396 crore so far in January 2025. After all, what has happened that foreign investors are hell-bent on emptying India’s treasury? Let us tell you that the main reasons for withdrawal of money by foreign investors are falling rupee, strengthening dollar, rising returns in American bonds and fear of weak quarterly results of Indian companies once again. Due to this, foreign investors are rapidly withdrawing money from the Indian market. Earlier in December, FPIs had injected Rs 15,446 crore into the Indian stock market.
Pressure on foreign investors increases due to fall of rupee
Due to various obstacles on the domestic and global front, there has been a change in the attitude of foreign investors. Himanshu Srivastava, associate director-manager research at Morningstar Investment Advisors India, said that the continuous decline in the Indian rupee has put a lot of pressure on foreign investors. This is the reason why they are withdrawing their investments from the Indian market. Apart from this, despite the recent fall, high valuations of Indian stocks, possibility of weak quarterly results, uncertainty about the pace of economic growth are influencing investors, he said. According to the data, foreign portfolio investors have pulled out a net Rs 44,396 crore from Indian stocks so far this month (till January 17). FPIs have been selling on all days of this month except January 2.
Selling in Indian debt and bonds also
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that the main reason for the continuous selling by FPIs is the strengthening of the dollar and rising bond yields in the US. The dollar index is above 109 and the yield on 10-year US bonds is above 4.6 percent. In such a situation, it is logical for FPIs to sell in emerging markets, especially the most expensive emerging market India. Since bond yields in the US remain attractive, FPIs are also selling in the debt or bond markets. They have withdrawn Rs 4,848 crore under the general limit in the bond market and Rs 6,176 crore through the voluntary retention route.
Bumper investment was made in 2023
Overall, the trend reflects a cautious stance by foreign investors, who made a net investment of only Rs 427 crore in Indian stocks in 2024. Earlier in 2023, FPI investment in Indian shares was Rs 1.71 lakh crore. FPIs had pulled out Rs 1.21 lakh crore from the Indian market amid aggressive rate hikes by global central banks in 2022.
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