May 20, 2024
NEW DELHI – Foreign investors have pulled out a massive Rs 28,200 crore from Indian equities so far in May owing to uncertainties about the outcome of the general elections and attractive valuations of Chinese markets.
According to the data with the depositories, foreign portfolio investors experienced a net outflow of Rs 28,242 crore in equities this month (till May 17).
Notably, this withdrawal was way higher than a net pullout of over Rs 8,700 crore in April. Last month, the withdrawal was on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields.
It is anticipated that going forward, there is likely to be a dramatic change in foreign portfolio investors’ (FPIs) equity flows in response to election results.
Further, as per the data, FPIs invested Rs 178 crore in the debt market during the period under review.
In terms of inflows, the foreign investors put in Rs 13,602 crore in March, Rs 22,419 crore in February, and Rs 19,836 crore in January. This inflow was driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index.
JP Morgan Chase & Co in September last year announced that it will add Indian government bonds to its benchmark emerging market index from June 2024. This landmark inclusion is anticipated to benefit India by attracting around USD 20-40 billion in the subsequent 18 to 24 months.
Overall, FPIs withdrew a net amount of Rs 26,000 crore in equities in 2024 so far. However, they invested Rs 45,000 crore in the debt market.