Due to the strengthening of the dollar, rising bond yields in the US and fears of weak quarterly results of companies, foreign portfolio investors (FPIs) have withdrawn Rs 44,396 crore from the Indian stock market so far this month. This information has been obtained from depository data. In December, FPIs had invested Rs 15,446 crore in the Indian stock market, but now the attitude of foreign investors has changed due to domestic and global challenges.
According to Himanshu Srivastava, Associate Director-Manager Research, Morningstar Investment Advisors India, “The continuous decline of the Indian rupee has put pressure on foreign investors, due to which they are pulling out their investments from the Indian market.”
Withdrawals every day this year, except January 2
He said that despite the recent decline, high valuations of Indian stocks, the possibility of weak quarterly results and uncertainty over the pace of economic growth are influencing investors. According to the data, this month (till January 17) FPIs have made a net withdrawal of Rs 44,396 crore from Indian stocks, with FPIs selling on all days of this month except January 2.
VK Vijayakumar, chief investment strategist, Geojit Financial Services, said, “The main reasons for continued selling by FPIs are the strengthening of the dollar and rising bond yields in the US. The dollar index is above 109 and the yield on 10-year US bonds is above 4.6 percent. In such a situation, it makes sense for FPIs to sell in emerging markets, especially expensive emerging market India.”
Reasons for disillusionment with the Indian stock market
Due to attractive bond yields in America, FPIs are also selling in the debt or bond market. They have withdrawn Rs 4,848 crore under the general limit in the bond market and Rs 6,176 crore through the voluntary retention route. Overall, the trend reflects a cautious stance by foreign investors, who made a net investment of only Rs 427 crore in Indian stocks in 2024. Earlier, FPI investment in Indian equities stood at Rs 1.71 lakh crore in 2023, while FPIs had withdrawn Rs 1.21 lakh crore from the Indian market in 2022 amid aggressive rate hikes by global central banks.
