Foreign investors, who had been pouring money into the Indian market for the past two months, changed course in April by becoming net sellers. They sold off Indian equities worth Rs 8,700 crore due to concerns about changes in India’s tax treaty with Mauritius and a continuous increase in US bond yields. This reversal came after a significant investment of Rs 35,098 crore in March and Rs 1,539 crore in February.
Overall, the total inflow for 2024 so far has been Rs 2,222 crore in equities and Rs 44,908 crore in the debt market. Data shows that Foreign Portfolio Investors (FPIs) made a net outflow of Rs 8,671 crore from Indian equities.
Kislay Upadhyay, smallcase manager and founder of Fidelfolio, attributed this outflow to a necessary adjustment following heavy inflows in March, as well as a shift towards shorter-term gains in longer-duration bonds in anticipation of a rate cut. Investors are also in a ‘wait and watch’ mode until the announcement of election results.
The alteration in India’s tax treaty with Mauritius, coupled with uncertain global market cues and interest rate outlook, has deterred foreign investors. Additionally, the surge in commodity prices, particularly oil, and higher US retail inflation have dimmed hopes of a prompt rate cut by the US Federal Reserve, leading to an increase in US 10-year yields.
Despite the FPI selling, domestic institutional investors (DIIs), High Networth Individuals (HNIs), and retail investors have been absorbing the sales in the equity markets. However, FPIs withdrew Rs 10,949 crore from the debt market during the same period.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the sustained rise in US bond yields, which now stands at around 4.7 percent, has been the trigger for this renewed FPI selling. This comes after foreign investors had invested Rs 13,602 crore in March, Rs 22,419 crore in February, and Rs 19,836 crore in January, driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index.
Overall, the market is experiencing a wave of uncertainty and cautiousness as investors navigate through changing global dynamics and economic indicators. The Importance of Regular Exercise for Overall Health
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