Foreign Investors Retreat from Indian Equities

Foreign portfolio investors (FPIs) have pulled out a significant Rs 4,285 crore from Indian equities in the first three trading days of January. This move comes ahead of the third-quarter earnings season, highlighting concerns over high stock valuations and global economic uncertainties.

Global and Domestic Challenges

V K Vijayakumar, chief investment strategist at Geojit Financial Services, mentioned, "FPIs are likely to continue selling as long as the dollar remains strong and US bond yields offer attractive returns." This sentiment is echoed by the strong dollar index and high US bond yields, which are significant deterrents to FPI flows.

Investor Sentiment and Market Outlook

Himanshu Srivastava from Morningstar Investment Research India pointed out the cautious stance of investors ahead of the Q3FY25 earnings season and the potential economic policies of the US President-elect. The rupee's depreciation against the dollar and the US Federal Reserve's indication of fewer rate cuts in 2024 have further dampened investor confidence.

Contrasting Investment Trends

Despite the massive net inflow of Rs 1.71 lakh crore in 2023, driven by optimism about India's economic prospects, 2024 has seen only Rs 427 crore in net inflows so far. This stark contrast underscores the uneasiness among investors as markets face a mix of domestic and global headwinds.