Foreign portfolio investors (FPIs) have sold shares worth over $124 million in the first two sessions of calendar year (CY) 2017, after the rally in the US dollar after Donald Trump’s victory in the US presidential elections. The rally in the dollar has made Indian equities less attractive to foreign buyers.
FPIs had sold stocks worth $1.2 billion in December 2016. Foreign investors had sold stocks worth $4.6 billion in the last three months of CY2016, the highest in the preceding 11 quarters.
Even though overseas investors were net sellers in the last three months and first two months of CY2016, they were net buyers of $3 billion worth of stocks during the year.
However, markets such as Taiwan and South Korea attracted more foreign flows than India in 2016. Taiwan has attracted the highest inflows of $10.9 billion followed by South Korea, which has pulled in $ 10.4 billion. Indonesia, however, hasn’t been a big destination with inflows of $1.25 billion moving into its equity markets in the year so far.
Market participants said volatility will continue in the coming months, as earnings recovery of companies has been pushed further by a couple of quarters due to demonetisation.
In a note to investors, Bank of America Merrill Lynch said earnings for the next three-four quarters will be volatile and downgrades are likely to continue. However, equities can match/beat bonds as interest rates will remain low and strong mutual fund inflows will continue.