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Market Insight: Foreign Investors shift in September amid global dynamics

Sep 11, 2023

By: BlinkX Research Team

Foreign portfolio investors (FPIs) have shifted from consistent buyers to net sellers in the Indian equity market, withdrawing Rs 4,200 crore in September due to rising US bond yields, a stronger dollar, and global economic growth concerns. 

Analysts predict the outflow may continue in the coming weeks, emphasizing the rupee's volatility as an additional factor to monitor. 

Data from depositories indicates FPIs have pulled out Rs 4,203 crore from equities in September, following a four-month low of Rs 12,262 crore invested in August. Before this reversal, FPIs had continuously invested in Indian equities over the past six months, totaling Rs 1.74 lakh crore from March to August. The abrupt shift in September can be attributed to increasing US bond yields and a rising dollar index. 

Concerns about the global interest rate landscape, including surging oil prices and inflation risks, have made investors cautious. They are adopting a "wait-and-watch" approach amid speculation about an impending US interest rate hike and its potential impact on the global economy. Additionally, FPIs invested Rs 643 crore in India's debt market. 

Despite the equity outflows, FPIs have maintained interest in capital goods and power sectors, while continuous selling in financials has subdued banking blue-chip prices. Experts suggest FPI sentiment may improve when the dollar index and US bond yields decrease, contingent on incoming US inflation and growth data.