FPIs take out Rs 24,700 Cr from equities on rising US bond yields

Foreign Portfolio Investors (FPIs) have dumped Indian equities worth Rs 24,700 crore so far this month, owing to surging bond yield in the US. On the other hand, they are bullish on the debt market and infused Rs 17,120 crore in the debt market during the period under review, data with the depositories showed.

According to the data, FPIs made a net investment of Rs 24,734 crore in Indian equities this month (till January 25). Before this, FPIs made a net investment of Rs 66,134 crore in the entire December and Rs 9,000 crore in November.

"The rising bond yields in the US is a matter of concern and this has triggered the recent bout of selling in the cash market," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

"The rally in global stock markets was triggered by the Fed pivot which saw the 10-year bond yield falling from 5% to around 3.8%. "Now the 10-year bond is back at 4.18% which indicates that the Fed rate cut will come only in H2 of 2024," he added.

FPIs started the new year with a cautious approach opting to book profits in the Indian equity markets as they touched all-time high levels. Moreover, uncertainty over the interest rate scenario also prompted them to stay on the sidelines and wait for further cues, before taking investment decisions with respect to investing in emerging markets like India, Himanshu Srivastava, Associate Director-Manager Research at Morningstar Investment Research India, said.

On a bullish stance in the debt markets, experts said that the announcement by JP Morgan Chase & Co. in September last year that it will add Indian government bonds to its benchmark emerging market index from June 2024 influenced the inflow in the country's bond markets in the past few months.

FPIs made a net investment of Rs 18,302 crore in the debt market in December, Rs 14,860 crore in November, and Rs 6,381 crore in October, data showed.

In terms of sector, FPIs were sellers in auto and auto ancillary, media and entertainment and marginally in IT and they bought in oil and gas, power and selectively in financial services, Geojit's Vijayakumar said.

Overall, the total FPI flows for 2023 stood at Rs 1.71 lakh crore in equities and Rs 68,663 crore in the debt market. Together, they infused Rs 2.4 lakh crore into the capital market.

The flow in Indian equities came following a worst net outflow of Rs 1.21 lakh crore in 2022 on aggressive rate hikes by the central banks globally. Before the outflow, FPIs invested money in the last three years.