Fearing an aggressive rate hike by the US Federal Reserve, foreign investors took a cautious approach last week, pulling out over Rs 4,500 crore from the Indian stock market. This withdrawal has been made after a net investment of Rs 7,707 crore by foreign portfolio investors (FPIs) during April 1 to April 8. This information has been obtained from depository data.
Earlier, FPIs had remained net sellers for six months till March 2022 and had pulled out a huge net amount of Rs 1.48 lakh crore from equities. This has been largely driven by fears of a rate hike by the US Federal Reserve and the deteriorating geopolitical environment after Russia’s invasion of Ukraine.
According to depository data, FPIs pulled out a net amount of Rs 4,518 crore from Indian equities during April 11-13. Apart from equities, FPIs pulled out a net Rs 415 crore from debt markets during the period under review as against a net inflow of Rs 1,403 crore in the previous week.
The last trading week ended on April 13 as markets remained closed on April 14 and April 15, respectively, on account of Ambedkar Jayanti and Good Friday.
Himanshu Srivastava, Associate Director- Manager Research, Morningstar India, said fear of aggressive rate hike by the US Fed made FPIs net sellers. This may prompt investors to again take a cautious approach to their investments in emerging markets like India.
Jama Wealth co-founder Manoj Trivedi said the ongoing sell-off is not due to India-specific factors. This could be due to various uncertainties like ongoing war, increase in domestic (US) interest rates.
Let us tell you that last month the US Fed raised rates by a quarter percent for the first time since 2018. US Paid also indicated a higher rate hike this year.