New Delhi: Continuing a steady flow for the fifth consecutive month, foreign portfolio investors (FPI) pumped out Rs 35,506 crore from Indian markets in February.
FPIs have been pulling out revenues in Indian markets from October 2021 and Quantum exports in February 2022 are the highest since March 2020 when overseas investors have pumped Rs 1,18,203 crore.
“The rate of fluctuations increased sharply after the US Fed decided to cut interest rates and increase interest rates sooner rather than later.
“In addition to this, tensions arose between Russia and Ukraine, and with fears of war between the two countries advancing, foreign investors took a cautious approach and began to avoid investing in emerging markets. as India, ”Himanshu Srivastava, associate director. (administrative study) of Morningstar India, say.
Now, with Russia hitting Ukraine, geopolitical tensions of this kind do not augur well for emerging markets like India with respect to foreign currencies as such markets are considered to be risky investment destinations and more susceptible to geopolitical turmoil compared to developed markets, mainly.
During February 1-25, the FPI withdrew Rs 31,158 crore from equities, Rs 4,467 crore from the debt section, according to the deposit data.
However, pumping in Rs 120 crore into hybrid facilities during the same period.
Geojit Financial Services Chief Investment Strategist VK Vijayakumar says it is difficult to anticipate how the Ukraine crisis will unfold. If the conflict persists for a while, the consequences for the global economy will be dire.
“Crude oil at USD 104 per barrel will be bad for Indian macros. The trade deficit will expand, the rupee will depreciate further, and inflation will rise above the RBI comfort levels which has caused the central bank to neglect the domestic financial situation. This could affect India’s development. recovery, “he said.
FPI inflows are nothing but hot money and first follow four worlds, said Shrikant Chouhan, head (research-store) of Kotak Securities.
The first is the exchange rate of Indian rupee vis-a-vis dollar. Dollar and rupee are related.
Second, oil prices. If they are at higher / higher levels then it makes them less likely to invest in emerging markets as many of them rely on imports that undermine basic infrastructure, he said. .
Third, if the U.S. 10-year yield rate starts to rise, it would be more prudent to invest in the bond market than to invest in risky assets such as equity and, finally, nationally. they invest in tackling a political event, inviting change and bringing about a sudden change in price.
“Unfortunately, all of these factors are affecting at the same time, which is why there is a greater possibility of further flow from the FPIs,” Chouhan said.
For the future of the FPI streams, Nitin Raheja, chief executive and head (strategic analysts) of Julius Baer, said the Ukraine crisis and its impact on energy markets will mean that for the near future, it could be the most risky business in the world. which is not good for emerging markets.