FPIs turning their backs on Indian markets, so far withdrawn Rs 18856 crore in February

Foreign portfolio investors (FPIs) pulled a net Rs 18,856 crore from Indian markets so far in February amid geopolitical tensions and the prospect of a rate hike by the US Federal Reserve. According to data from depositories, foreign investors pulled out Rs 15,342 crore from equities and Rs 3,629 crore from the bond market between February 1-18, while Rs 115 crore was infused in hybrid instruments.

This is the fifth consecutive month of foreign fund withdrawals. Himanshu Srivastava, Associate Director and Manager Research, Morningstar India said, “Geopolitical tensions and the prospect of a rate hike by the US Fed have triggered the outflow of FPIs from the Indian equity markets in recent days. They have sharply increased the selling momentum after signaling the end of the loose monetary policy regime."

Shrikant Chauhan, head-equity research (retail), Kotak Securities, said rising tensions between the US and Russia over Ukraine pushed investors into defensive zones and safe havens like bonds and gold. At the same time, Rajesh Bhatia, MD and CIO, ITI Long Short Equity Fund said, "The net outflow of FPIs from Indian equities in the last one year is close to USD 8 billion. This figure is the highest since 2009."

Bhatia said, “FIIs have sold around Rs 17,500 crore so far in February. While VK Vijayakumar, chief investment strategist, Geojit Financial Services, said, “FPIs can expect further sales when unless market corrections make valuations attractive.

He added that domestic institutional investors and HNIs are gradually accumulating high quality financials, whose valuations have become attractive due to continued selling of FPIs.