FPI Out Flow: Amid uncertainty over election results, foreign investors sold shares worth Rs 25,586 crore in May, invested Rs 8,761 crore in the bond market

FPIs take out Rs 25586 crore from equities in May: Due to uncertainty over the results of the general elections and the better performance of the Chinese markets, foreign investors i.e. FPIs sold shares worth Rs 25,586 crore in May. This is much more than the net withdrawal figure of more than Rs 8,700 crore in April due to concerns about changes in India’s tax treaty with Mauritius and the continued rise in US bond yields. During this period, foreign investors invested Rs 8,761 crore in the debt market i.e. bond market. The results of the general elections are to be announced on Tuesday, June 4. The election results will determine the direction of FPI flow in the Indian market in the coming days.

FPIs sold shares worth Rs 25,586 crore in May, invested Rs 8,761 crore in the bond market

According to the depository data, foreign investors have withdrawn a net Rs 25,586 crore from shares in May. Prior to that, foreign investors had invested Rs 35,098 crore in shares in March and Rs 1,539 crore in February, i.e. bought Indian shares. At the same time, in January, FPIs had withdrawn Rs 25,743 crore from shares. Overall, foreign investors have withdrawn Rs 23,364 crore from shares so far in 2024. During this period, foreign investors have invested Rs 8,761 crore in the debt market i.e. bond market. 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, during the last 5 months, foreign investors have invested Rs 53,669 crore in the bond market.

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What do experts say

Vijaykumar, chief investment strategist at Geojit Financial Services, said that US interest rates will have a greater impact on FPI flows in the medium term. Vijaykumar said that the main reason for FPI selling has been the better performance of Chinese stocks. The Hang Seng index has climbed 8 per cent in the first fortnight of May. He said that another reason for FPI selling is the increase in bond yields in the US. Whenever the yield on 10-year bonds in the US goes above 4.5 per cent, FPIs sell in emerging markets like India and invest their investments in bonds. He said that in case of strong GDP growth figures, inflation rate being within management and political stability, FPIs can buy further.

Vipul Bhowar of Waterfield Advisors said that FPIs are withdrawing from Indian stocks due to relatively high valuations and political uncertainty along with 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.

According to the 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 in the entire financial year 2023-24 has been 8.2 percent. Apart from this, the record dividend of Rs 2.1 lakh crore of the Reserve Bank of India (RBI) has provided financial scope to the government to push forward infrastructure spending.