Due to growing interest rates and geopolitical unrest in the Middle East, Foreign Portfolio Investors (FPIs) continued their selling binge, withdrawing nearly Rs 3,400 crore from the Indian equities markets in the first three trading sessions of November.
This followed withdrawals by these investors of Rs 14,767 crore in September and Rs 24,548 crore in October, according to statistics from the depositories.
Prior to the withdrawal, FPIs made a constant stream of purchases of Indian stocks in the final six months, from March to August, bringing in a total of Rs 1.74 lakh billion, according to a report by Mint.
Since the primary catalyst for FPI selling, rising bond rates, has reversed after the US Federal Reserve signalled a dovish position in its November meeting, it seems doubtful that this selling trend will continue in the future.
"The main trigger for this reversal in bond yields is the subtle dovish commentary from Fed chief Jerome Powell that 'despite elevated inflation, inflationary expectations remain well anchored'. The market has interpreted this statement as the end of the rate hiking cycle," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told Mint.
Based on the information provided by the depositories, FPIs sold shares worth Rs 3,412 crore between November 1 and November 3. Since the beginning of September, FPIs have been selling aggressively.
"This could be largely attributed to the growing geopolitical tensions due to the conflict between Israel and Hamas, alongside a notable rise in US Treasury bond yields," Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Adviser India, told Mint.
Experts predict that under the current circumstances, safe-haven assets like gold and US dollars may receive more attention. In contrast, statistics indicated that the debt market brought in Rs 1,984 crore during the reviewed period, following its receipt of Rs 6,381 crore in October.