Foreign investors continue to desert Indian equity markets and have pulled out over Rs 4,000 crore this month so far amid steady appreciation of the dollar and rising interest rates in the US.
However, the pace of selling by foreign portfolio investors (FPIs) has been declining over the last few weeks.
“With oil prices breaching the USD 100 a barrel mark, and refining margins cracking across markets, hopes for lower inflation helped improve market sentiments. RBI’s measure to help stem the sliding rupee added to the building bullish momentum,” said Vijay Singhania, Chairman at TradeSmart.
Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, however, believes that the decline in the pace of net withdrawal by FPIs does not signify a change in trend as there has not been any significant improvement in the underlying drivers.
FPIs have been on selling mode for the last nine months.
FPI inflows will resume once there are clear indications of inflation peaking out, likely to be manifested in global CPI readings around August-September, said Hitesh Jain, Lead Analyst - Institutional Equities, YES Securities.
“If the high inflation narrative takes a back seat, there will also be a possibility of central banks turning soft on the projected rate hikes, which again will bring the risk assets back in the reckoning,” he added.
According to data with depositories, FPIs pulled out a net amount of Rs 4,096 crore from the Indian equity market during July 1 - 8.
However, for the first time in several weeks, FPIs bought equities worth over Rs 2,100 crore on July 6.