Foreign Portfolio Investors (FPIs) saw moderate inflows of ₹7,320 crore in August, with steady investment in the debt market. However, there were five key factors behind the recent sell-off.
1. Global uncertainties: FPIs were cautious due to geopolitical tensions and concerns over trade wars, leading to a decrease in risk appetite.
2. Rising bond yields: Higher bond yields in the US and other developed markets made Indian bonds less attractive for foreign investors.
3. Liquidity crunch: The liquidity crisis in the domestic market impacted FPI sentiment, as investors were wary of the impact on Indian companies.
4. Regulatory changes: The government’s decision to levy a higher surcharge on FPIs in the Union Budget dampened investor sentiment.
5. Profit booking: FPIs may have taken advantage of the recent rally in the Indian markets to book profits, leading to the sell-off.
Overall, while FPI inflows remained moderate in August, the sell-off was driven by a combination of global uncertainties, rising bond yields, liquidity concerns, regulatory changes, and profit booking.