Foreign investors, continuing their selling spree, have so far sold Indian stocks worth more than Rs 39,000 crore this month amid rising US bond yields, appreciation of the dollar and prospects for more aggressive rate hikes by the Federal Reserve.
The net outflow of Foreign Portfolio Investors (REITs), with it, from shares has reached Rs 1.66 lakh crore so far in 2022.
According to Shrikant Chouhan, Head – Equity Research (Retail), Kotak Securities, the inflow of REITs into India is likely to remain volatile in the future, given the headwinds in terms of high crude prices, inflation and monetary policy. restrictive.
“Recently, there are signs of REIT selling exhaustion, and domestic institutional investors (DIIs) and retail buying are emerging as a powerful counter to REIT selling.
“At higher levels, REITs may continue to sell. If global markets are stable, REIT selling will be easily absorbed by DII plus retail buying,” said VK Vijayakumar, chief investment strategist at Geojit. Financial Services.
Foreign investors remained net sellers for the seven months to April 2022, pulling out a whopping Rs 1.65 lakh crore from the shares.
REITs turned net investors in the first week of April due to a market correction and invested Rs 7,707 crore in stocks.
However, after a short break, they became net sellers again in the following weeks.
REITs sold shares with a net worth of Rs 39,137 crore from May 2 to May 27, according to custodian data. There are still two trading sessions left in the month.
“Relatively high valuations in India, rising bond yields in the United States, appreciation of the dollar and concerns about the possibility of a recession in the United States triggered by aggressive tightening are factors behind the withdrawal from the FPI,” Vijaykumar said.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said investors are also cautious amid fears that high inflation could hamper corporate earnings and impact consumer spending.
These factors, along with the continued war between Russia and Ukraine, could further dislodge global economic growth.
On the home front too, concerns over soaring inflation as well as further rate hikes by the RBI, and its impact on economic growth, weighed heavily, he added.
The selling off of REITs continued during the month. However, the week ended on a slightly positive note. This was partly because global markets took the negative US GDP numbers in their stride and rose. The friction was visible in Indian markets, especially during the last two days of the week, said Vijay Singhania, president of TradeSmart.
In addition to equities, REITs withdrew a net amount of around Rs 6,000 crore from the debt market during the period under review.
Apart from India, other emerging markets including Taiwan, South Korea, Indonesia and the Philippines have also seen capital outflows in May so far.
With PTI inputs