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Foreign portfolio investors sell $4.9-billion shares in February, highest since March 2020

Russia’s offensive against Ukraine, higher bond yields and imminent Fed rate hikes have led to the intensified FPI selling in February across major emerging markets, including India.

DIIs bought shares worth Rs 42,084.07 crore in February.
DIIs bought shares worth Rs 42,084.07 crore in February.

By Ruchit Purohit

Foreign portfolio investors (FPIs) remained net sellers for the fifth straight month in February, offloading shares worth $4.9 billion during the month, data from NSDL showed. This was also the highest selling by FPIs since March 2020, when they sold shares worth $8.3 bn after the pandemic had started. In March 2020, the Sensex and Nifty corrected 23.05% and 23.25, respectively. However, during February 2022, the markets corrected only 3%, as inflows by domestic institutional investors (DIIs) offset heavy selling by foreign investors. DIIs bought shares worth Rs 42,084.07 crore in February.

Russia’s offensive against Ukraine, higher bond yields and imminent Fed rate hikes have led to the intensified FPI selling in February across major emerging markets, including India. Taiwan witnessed the highest outflows among all emerging markets at $5.92 bn, data from Bloomberg showed.

Vivek Sharma, head – international clients group, Edelweiss Wealth, told FE: “Recent FPI outflows are a result of a change in the global investment environment. Investors had to contend with a more hawkish Federal Reserve that is prepared to hike interest rates more aggressively to combat inflation. Typically, EM markets tend to see outflows with tightening of the monetary regime by the US Fed.”

He said increasing geopolitical tensions in Europe and the outbreak of military conflict between Ukraine and Russia spur FPI outflows. However, despite heavy outflows in the last five months, the number of new FPI accounts increased during the same period. The number of new FPI accounts from October 2021 to February 2022 stood at 73, 78, 99, 114 and 144, respectively.

Outflows will not be long-lived and overseas investors will find a way back and continue to show faith in India, given the robust economic and overall corporate growth. The demand from FPIs is also evident from the number of FPI accounts opened, despite volatility and outflows in the market, analysts said. “The structural and long-term factors underpinning India’s future economic growth remain robust. The increasing number of new FPIs created over the past five months points to global investors’ strong willingness to invest in India,” Sharma said.

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