Fpi Caution In Equity Market Continues, Over ₹35,000 Cr Dumped So Far In May
The foreign portfolio investors (FPIs) caution in the Indian equity market is unwavering so far this year and up till now, May month has followed a similar pattern. In the current month, so far, FPIs have pulled out more than ₹35,000 from the equity market, while the overall outflow in the year is massive over ₹1.62 lakh crore.
As per NSDL data, in the equity market, FPIs removed a total of ₹35,137 crore so far till the 20th of May. This is more than doubled the outflow of ₹17,144 crore recorded in the whole month of April.
For FPIs selling spree in May, Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “The major factor behind the relentless FPI selling is the appreciation of the dollar which has taken the dollar index above 103. Also, India is the major emerging market where FPIs are sitting on big profits and the market is very liquid to absorb FPI selling.
“Since the mother market, US, is weak and dollar is strengthening, FPIs are likely to continue selling in the near term,” Vijaykumar added.
The appetite for the equities market has been volatile both on the domestic and global front. A series of events and factors have dampened investors’ confidence in the market with the Russia-Ukraine war and inflationary pressure emerging as a major spoilsport.
Year-to-date, the FPI pulled out a whopping ₹1,62,299 crore from the Indian equity market. The highest selloff was in March when the outflow stood at ₹41,123 crore. Among the first five months of 2022, FPIs selling bias slowed in April but picked up in May again as fear of economic recovery from the pandemic seemed to slow down amidst raging inflation rate, interest rate hikes, supply chain constraints, and uncertainties around Russia-Ukraine conflict. Also, a possible recession in the offing ahead – had added to the woes.
In January, the FPI outflow was at ₹33,303 crore in the equity market, while in February the investors removed ₹35,592 crore.
So far in 2022, Sensex and Nifty 50 have dropped by around 8%.
Another volatile trading week has closed with Indian markets witnessing a relief rally on Friday tracking positive global cues. Sensex settled at 54,326.39 up by 1534.16 points or 2.91%. Nifty 50 ended at 16,266.15 up by 456.75 points or 2.89%.
Vinod Nair, Head of Research at Geojit Financial Services said, “The market displayed a confident yet calm rally throughout the day, supported by fortified global markets, especially the Asian market. The Chinese Central bank cut a key interest rate to support growth, injecting optimism into emerging markets. With concerns over an economic slowdown and rate hikes across the globe, investors will continue to invest with caution. Value stocks should do well during this consolidation period”
Meanwhile, Vijayakumar said, “The excessive volatility in the market is broadly due to two reasons. One, the market has discounted severe monetary tightening by the Fed which is likely to take the Fed funds rate to around 3% in 2023. Two, the market has not fully discounted the probability of the US economy slipping into recession in 2023. Till there is clarity on the second issue, the ‘risk-off, risk-on mode’ in the market is likely to continue in the near term. It may take a few weeks for the markets to stabilize.”
Vijayakumar added, “It is important to appreciate the fact that the dominant feature of this market is bearish in the short-term. Nasdaq is 30% down from the peak and S&P 500 is 19% down from the peak. These are reflections of weakness in the market.”
In India, Vijayakumar concluded saying, “FIIs are likely to continue selling since India is the only emerging market where they are sitting on good profits and the market provides the liquidity to sell”