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Foreign investors turn cautious, withdraw over Rs 4,500 cr from Indian equities in July so far

Foreign investors turn cautious, withdraw over Rs 4,500 cr from Indian equities in July so far

Foreign portfolio investors pulled out Rs 4,515 crore from the equities during July 1-16, depositories data showed

In June, FPIs became net buyers in Indian markets at Rs 13,269 crore In June, FPIs became net buyers in Indian markets at Rs 13,269 crore

Overseas investors have withdrawn Rs 4,515 crore from the Indian equities in the first half of July as they turn cautious towards the market.

Even though the continuing firmness in the dollar and the probability of rising bond yields in the US did not bode well for capital flows into emerging markets like India, there is no immediate concern at the moment, Himanshu Srivastava, Morningstar India Associate Director (Manager Research) told PTI. 

He added that with markets trading near an all-time high, foreign investors would have chosen to book profits.

Srivastava further noted that FPIs have also been "staying on the sidelines given high valuations and most likely on the back of the risk of a potential third wave of the coronavirus pandemic." 

Also Read: FPIs withdraw over Rs 2,000 cr from Indian equities in July so far

Though the continuing firmness in the dollar and the possibility of rising bond yields in the US do not augur well for capital flows into emerging markets like India, there is no immediate worry at the moment, he said. 

Besides, he also added that the outflows have not been huge which signifies that foreign investors are adopting a cautious stance towards Indian equities rather than being negative on it. 

Overseas investors pulled out Rs 4,515 crore from the equities during July 1-16, depositories data showed. 
At the same time, they invested Rs 3,033 crore in the debt segment. 

Net outflow during the period under review stood at Rs 1,482 crore. In June, FPIs became net buyers in Indian markets at Rs 13,269 crore. 

Commenting on the FPI activity in 2021 so far, V K Vijayakumar, chief investment strategist at Geojit Financial Services, said it has been "hugely volatile". 

Also Read: India reports current account surplus of 0.9% in FY21

They were aggressive buyers for three months during January, February and March. On concerns of adverse impact of the second wave of the pandemic, FPIs sold in April and May. They made a comeback in June and started buying and now in July, they have again started selling, he noted. 

For other emerging markets, Kotak Securities Executive Vice-President (Equity Technical Research) Shrikant Chouhan said that except for Indonesia, all other emerging markets have witnessed FPI outflows in July so far. 

"Philippines, South Korea, Taiwan and Thailand saw a total outflow of $151 million, $2,043 million, $373 million and $282 million, respectively. Indonesia reported inflows to the tune of $59 million during the same period," he noted. 

On the outlook, he also said FPI flows to India may remain volatile in the near term due to the US Fed monetary policy and rising crude oil prices. 

(With inputs from PTI.)