Unprecedented FPI Exodus Amidst Rupee Depreciation

Foreign Portfolio Investors (FPIs) have significantly withdrawn Rs 64,156 crore ($7.44 billion) from Indian equity markets this January. This massive exodus is primarily fueled by the depreciation of the rupee, rising US bond yields, and a less than optimistic earnings season forecast.

Global and Domestic Challenges

Himanshu Srivastava from Morningstar Investment Advisers India highlights the pressure on foreign investors due to the rupee's depreciation. Additionally, the high valuation of Indian equities, despite recent corrections, and macroeconomic challenges are making investors cautious. The unpredictable nature of Trump's policies further exacerbates the situation, steering investors away from riskier investments.

Market Sentiments and Future Outlook

According to V.K. Vijayakumar of Geojit Financial Services, the strengthening dollar and rising US bond yields are key drivers behind the FPI selling. As long as the dollar index remains above 108 and the 10-year US bond yield stays above 4.5%, the selling trend is expected to continue.