Continuing its selling spree for the seventh consecutive month, foreign investors pulled Rs 17,144 crore off the Indian stock market in April amid fears of an aggressive rate hike by the US Fed that haunted those investors and rattled investors. feelings.
In addition, foreign flows are expected to remain volatile in the near term amid a strong prospect of aggressive rate hikes globally and headwinds in terms of higher crude prices and rising inflation, said the experts.
Foreign Portfolio Investors (REITs) remained net sellers for seven months to March 2022, withdrawing a massive net amount of Rs 1.65 lakh crore from shares. These were mainly due to the anticipation of a rate hike by the US Federal Reserve and the deterioration of the geopolitical environment following the invasion of Ukraine by Russia.
After six months of selling frenzy, REITs turned net investors in the first week of April due to the market correction and invested Rs 7,707 crore in stocks. After a short break, they became net sellers again during the shortened holiday week of April 11-13, and selling continued in the following weeks as well.
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This makes overseas investors net sellers to the tune of Rs 17,144 crore in April, well below a net withdrawal of Rs 41,123 crore in March, according to custodian data. The selloff could be attributed to weak global indices after US Federal Reserve Chairman Jerome Powell hinted at a 50 basis point rate hike in May.
REITs continued to be a net seller in April as “markets continued to price in the likelihood of aggressive rate hikes from the U.S. Fed,” said head of equity research Shrikant Chouhan ( retail), Kotak Securities.
Himanshu Srivastava, Associate Director-Manager Research at Morningstar India, said: “Fears of an aggressive rate hike by the US Fed continued to haunt investors and dampen sentiment. This prompted investors to become risk averse and adopt a wait-and-see approach. when it comes to investing in emerging markets like India.
According to Vijay Singhania, Chairman of TradeSmart, inflation rates were a major reason for the stock pullback in April. Another reason is a US Fed rate hike to 2.866%. Apart from equities, REITs withdrew a net amount of Rs 4,439 crore from the debt markets during the period under review.
According to Srivastava, there is not much at the moment that could lift the spirits of foreign investors and entice them to invest in Indian stock markets.
“Besides an impending rate hike by the US Fed, the uncertainty surrounding the Russian-Ukrainian war, high domestic inflation numbers, crude price volatility and weak quarterly earnings don’t paint a very positive picture. “The resurgence of coronavirus cases is also adding to the concern in China. In such a scenario, REITs typically take a wait-and-see approach until greater clarity emerges,” he said.
Under the given circumstances and the rapidly changing global landscape, foreign flows into Indian equities may continue to be under pressure, until there is a change in the underlying drivers and the investment scenario, he added.
“With geopolitical factors currently affecting the market, REIT flows are likely to remain volatile in the near term,” said Singhania of TradeSmart.
Besides India, other emerging markets including Taiwan, South Korea and the Philippines have so far seen capital outflows in April.
First post: STI