Foreign investors have turned cautious and pulled out Rs 2,313 crore from Indian equities so far this month ahead of the release of Federal Reserve's latest meeting minutes. However, the pace of selling has come down compared to January, when Foreign Portfolio Investors (FPIs) took out Rs 28,852 crore. This was also the worst outflow in the last seven months, data with the depositories showed. Prior to that, they made a net investment of Rs 11,119 crore in December and Rs 36,238 crore in November.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said rising rates in the US might lead to more capital outflows from emerging markets including India. According to the data, FPIs withdrew a net amount of Rs 2,313 crore from Indian equities during February 1-24.
"FPIs turned cautious ahead of the release of the minutes of FOMC meeting and on the back of series of disappointing economic data in the US, indicating slow pace of moderation in inflation. This fanned concerns that the Fed will have to continue raising rates longer than expected," Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said. Also, despite the intermittent corrections in the market this year, Indian markets continue to trade at premium thereby providing a good profit booking opportunity, he added.
Last week, bond yields in the US continued to rise in anticipation of the Fed turning more hawkish in the context of the slow disinflation in the US. In terms of sector, a clear change in the sell portfolio has been witnessed. In the first half of February, FPIs turned buyers in financials, while they were selling in financials in January, Geojit's Vijayakumar said.
Also FPIs bought capital goods, IT and healthcare in the first half of February and they sold in oil & gas, metals and power, he added. On the other hand, FPIs have invested Rs 2,819 crore in the debt markets during the period under review.