The process of withdrawal of Foreign Portfolio Investors (FPIs) from the Indian stock markets continues.
The process of selling by foreign investors continues. The US Federal Reserve has increased the interest rate to control inflation, due to which bond yields are rising and investors are selling from the market intensifying.
Aggressive hike in interest rates by the US central bank, due to high inflation and high valuation of shares foreign portfolio investors ,Foreign Portfolio Investors) continues to sell in June as well. So far this month, FPIs have withdrawn Rs 31,430 crore from Indian stocks. This information has been obtained from the data of the depository. In this way, in the current year i.e. 2022, FPIs have sold shares worth Rs 1.98 lakh crore so far. Shrikant Chauhan, Head of Equity Research (Retail), Kotak Securities said, “FPI’s trend will remain volatile going forward. FPIs continue to be sellers in emerging markets due to geopolitical tensions, rising inflation, tightening of monetary stance by central banks.
According to the data, FPIs have pulled out a net Rs 31,430 crore from the Indian stock markets this month till June 17. FPI selling continues from October 2021. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “Global investors are reacting to the rising risk of recession across the world. Amidst rising inflation, the Federal Reserve has increased interest rates by 0.75 percent. The US central bank has indicated to take a tough stance even further.
The effect of increasing bond yield is also visible
He said that due to the strengthening of dollar and rising yield on bonds in the US, FPIs are mainly selling. The Federal Reserve, the Bank of England and the central bank of Switzerland have raised interest rates. Due to this FPIs are moving from stocks to bonds.
Better returns on bonds keep selling pressure on
Vijay Singhania, Chairman, TradeSmart said, “In such a scenario of uncertainty, when bonds offer safety of capital and offer better returns, investors are sure to sell.” America’s markets have seen the biggest weekly decline since March 2020. He said that inflation is a matter of concern on the domestic front and to curb it, the Reserve Bank is increasing policy rates.
RBI will also increase the repo rate
At the same time, Himanshu Srivastava, Associate Director-Manager Research, Morningstar India, believes that after the aggressive increase in interest rates by the Federal Reserve, the Reserve Bank will also increase policy rates in the next two-quarters.