FPIs withdraw Rs 28,200 cr from Indian equities on poll jitters, attractive Chinese mkt valuations

Foreign investors have withdrawn a massive Rs 28,200 crore from Indian equities so far this month, citing uncertainties about the outcome of the general elections and attractive valuations of Chinese markets. This withdrawal surpasses the net pullout of over Rs 8,700 crore in April, attributed to concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields.

Before this, FPIs made a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February. Moving forward, there is expected to be a significant change in FPIs' equity flows in response to election results. Political stability could attract significant inflows into the Indian market, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Following the Lok Sabha elections, FPI inflows into India could strengthen due to potential easing of interest rates by the US Federal Reserve, positive resolutions in global geopolitical tensions, and India’s increasing weight in the MSCI Emerging Markets Index, projected to exceed 20 per cent by mid-2024, as noted by Karthick Jonagadla, Manager and founder of Quantace Research.

According to data from depositories, foreign portfolio investors experienced a net outflow of Rs 28,242 crore in equities this month (till May 17). The main reasons cited for FPIs selling include uncertainty about the general elections and high market valuations.