FPIs withdraw Rs 31,430 crore from Indian equity markets in June so far

New Delhi: Aggressive rate hike by the US Federal Reserve, coupled with elevated inflation and high valuation of equities continued to keep foreign investors at bay from the Indian stock market as they pulled out Rs 31,430 crore in this month so far.

With this, net outflow by Foreign Portfolio Investors (FPIs) from equities reached Rs 1.98 lakh crore so far in 2022, data with depositories showed.

Going forward, FPI flows to remain volatile in the emerging markets on account of rising geopolitical risk, rising inflation, tightening of monetary policy by central banks, among others, Shrikant Chouhan, Head - Equity Research (Retail), Kotak Securities, said. According to the data, foreign investors withdrew a net amount of Rs 31,430 crore from equities in the month of June (till 17th).

The massive selling by FPIs continued in June too as they have been incessantly withdrawing money from Indian equities since October 2021.

Shrikant attributed latest selling to rising inflation, tight monetary policy by global central banks and elevated crude oil prices. Global investors are reacting to increased risks of a global recession as the US Federal Reserve was forced to raise interest rates by 75 basis points due to persistently elevated inflation. Moreover, it also indicated to continue its aggressive stance to contain stubbornly high inflation.

"Strengthening of the dollar and rising bond yields in US are the major triggers for FPI selling. Since the Fed and other central banks like Bank of England and Swiss central bank have raised rates, there is synchronised rate hikes globally, with rising yields. Money is moving from equity to bonds," V K Vijayakumar, Cheif Investment Strategist at Geojit Financial Services, said.

On the domestic side as well, inflation has been a cause for concern, and to tame that, RBI has also been increasing

rates.