Analysts indicate that future foreign investment patterns will be influenced by India’s ability to maintain economic stability and enhance business performance.
Key Points:
- Foreign investors withdraw Rs 1,36,000 crore within six weeks
- Rs 9,931 crore invested in new listings despite market exits
- Market valuation, reduced earnings, and US political impact drive selling
Foreign Portfolio Investors (FPIs) are rapidly withdrawing from Indian markets. According to NSDL data, October saw outflows of Rs 113,858 crore, with an additional Rs 22,420 crore withdrawn in early November.
According to Dr. VK Vijayakumar of Geojit Financial Services, three main factors are driving this trend: elevated Indian market valuations, earnings concerns, and the Trump effect.
Vipul Bhowar from Waterfield Advisors notes that reduced corporate performance, high market prices compared to other regions, and global factors including US bond yield increases have prompted foreign institutional selling.
Despite withdrawing Rs 32,351 crore from the secondary market in November, foreign investors have directed Rs 9,931 crore toward initial public offerings, showing particular interest in major listings like Swiggy and Hyundai.
Bhowar suggests that foreign selling may decrease as the year ends, with IPO investments partially offsetting secondary market exits.
The US political landscape has significantly influenced FPI decisions. Market expectations of corporate tax reductions and business-friendly policies under Trump have affected both US equity and bond markets, with potential deficit concerns impacting bond performance.
The rise in US 10-year bond yields to 4.42% has created challenges for emerging markets, affecting both equity and debt investments in India.
FPIs are adjusting their investment focus, moving from traditional sectors to high-growth areas. They are increasing investments in financial subsectors like asset management and exchanges, while reducing exposure to sectors sensitive to global commodity prices and infrastructure spending, such as automobiles and metals.
New regulatory measures by RBI and SEBI to reclassify foreign investments might help attract more international capital by simplifying investment procedures and reducing entry barriers.
Market experts emphasize that future foreign investment trends will depend on India’s economic management and corporate sector performance.
Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of stocktrading4u.com. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.