General election Foreign portfolio investors (FPIs) have made a massive withdrawal of Rs 25,586 crore from Indian stocks in May due to uncertainty over the results of the BSE and the better performance of Chinese markets. This is much higher than the net withdrawal figure of over Rs 8,700 crore in April due to concerns over changes in India’s tax treaty with Mauritius and the continued rise in US bond yields. According to depository data, earlier FPIs had made a net investment of Rs 35,098 crore in shares in March and Rs 1,539 crore in February.
The direction of FPI inflow will be decided by the results
The results of the general elections are to be announced on June 4. This will determine the direction of FPI flow in the Indian market in the near future. Vijaykumar, Chief Investment Strategist, Geojit Financial Services, said that US interest rates will have a greater impact on FPI flow in the medium term. According to the data, foreign portfolio investors have withdrawn a net Rs 25,586 crore from stocks in May. Vipul Bhowar, Director-Listed Investments, Waterfield Advisors, said, “FPIs are withdrawing from Indian stocks due to political uncertainty along with relatively high valuations and weak quarterly results of financial and IT companies in particular. Apart from this, FPIs are also withdrawing money from Indian stocks due to the attraction of FPIs towards Chinese markets.
China’s market is performing well
Vijaykumar said, “The main reason for FPI selling has been the better performance of Chinese stocks. The Hang Seng index has climbed eight percent in the first fortnight of May.” He said that another reason for FPI selling is the increase in bond yield in America. Whenever the yield on 10-year bonds in America goes above 4.5 percent, FPIs sell in emerging markets like India and invest their investments in bonds. He said that in case of strong GDP growth figures, inflation being within manageable limits and political stability, FPIs can buy further.
India’s growth rate was 8.2% in the financial year 2024
According to data released on Friday, the Indian economy grew at a rate of 7.8 percent in the fourth quarter of the last financial year, which is much higher than the estimate of 6.7 percent. India’s GDP growth rate has been 8.2 percent in the entire financial year 2023-24. Apart from this, the record dividend of Rs 2.1 lakh crore from the Reserve Bank of India has provided financial scope to the government to push forward infrastructure spending. FPIs have invested Rs 8,761 crore in the debt or bond market during the period under review. Earlier, foreign investors had invested Rs 13,602 crore in the bond market in March, Rs 22,419 crore in February and Rs 19,836 crore in January. Overall, FPIs have withdrawn Rs 23,364 crore from shares so far in 2024. During this period, they have invested Rs 53,669 crore in the bond market.
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