FPIs sell equities of over $1 billion in January

Tata Consultancy Services recently published its Q3 earnings, and the operating margins were not as attractive as envisaged by analysts. In addition, Raphael Bostic of the Atlanta Fed and Mary Daly of the San Francisco Fed put forth statements urging the US central bank to increase interest rates to over 5%. Their argument was the need to avoid any pre-mature false positive notions of triumph over inflation. The bottom line is that both these factors combined to spook Foreign Portfolio Investors flows. FPIs sold around $1.2 billion of Indian equities the first 8 trading sessions of year 2023. 

On a tangential note, FPIs were also worried about the CPI Inflation for India and the US Inflation to be announced today. India inflation has come in lower at 5.72%, which is a positive while the US inflation is expected to fall by 60 basis points from 7.1% in November to 6.5% in December 2022. However, core inflation in the US and India continues to be a major concern. FPIs are also concerned that the Russia-Ukraine war could still be a dampener and a likely slowdown in the Chinese economy due to the resurgence of COVID cases, could just dent the demand that appears to be reviving.

The European economy may lead the developed world into a recession. This is largely due to inordinately steep gas prices. Domestically, all eyes are pivoted on the Union Budget, which will be tabled on 01st February 2023. The major question for the FPIs is whether the current account deficit (CAD) will sober and whether the fiscal deficit will be a little more under control. Weakening macros have been a concern, so positive noises on the fiscal deficit front and the current account deficit front could be positive vibes for the market.