April saw FPIs sell Rs 6,300 cr worth of Indian shares due to a persistent increase in US bond rates

April saw FPIs sell Rs 6,300 cr worth of Indian shares due to a persistent increase in US bond rates

According to the data, until April 26th, Foreign Portfolio Investors (FPIs) withdrew a net amount of Rs 6,304 crore from Indian equity markets.

The good news is that domestic institutional investors (DIIs), high net worth individuals (HNIs), and retail investors are absorbing all FPI sales in the equities markets.

Concerns over changes to India's tax treaty with Mauritius and a persistent increase in the yield on US bonds caused foreign investors to sell domestic shares worth Rs 6,300 crore in April. This followed a staggering net investment of Rs 1,539 crore in February and Rs 35,098 crore in March, according to statistics from the depositories.

According to the data, until April 26th, Foreign Portfolio Investors (FPIs) withdrew a net amount of Rs 6,304 crore from Indian equity markets. The persistent increase in US bond rates is what set off this fresh round of FPI dumping in both stocks and debt. Foreign investors find the current yield on 10-year bonds, which is about 4.7%, to be quite appealing, according to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, stated that while the modification to India's tax treaty with Mauritius regarding investments made in India through the island nation still irritates foreign investors, weak signals from the global markets with an uncertain macro and interest rate outlook didn't augur well for emerging market equities. The US 10-year yield also rose as a result of the spike in commodity prices, particularly oil, and greater US retail inflation, which all but destroyed expectations of an early rate decrease by the US Fed. According to him, this could have led international investors to take a wait-and-see stance.

The good news is that domestic institutional investors (DIIs), high net worth individuals (HNIs), and retail investors are absorbing all FPI sales in the equities markets. The only thing that could stop FPI selling is this. During the period under review, FPIs withdrew Rs 10,640 crore from the debt market in addition to stocks.

Prior to this, overseas investors made investments of Rs 19,836 crore in January, Rs 22,419 crore in February, and Rs 13,602 crore in March. The impending addition of Indian government bonds to the JP Morgan Index was the primary driver of this influx. In September of last year, JP Morgan Chase & Co. said that starting in June of 2024, it would include Indian government bonds into its benchmark emerging market index.

With the expected inflow of USD 20–40 billion in the next 18–24 months, this historic inclusion might be advantageous for India. Thus far this year, the total inflows have been Rs 45,218 crore in the debt market and Rs 4,590 crore in the equity market.