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FPIs offload `14,800-cr worth equities in Jun

Poll results, attractive Chinese stock valuations weigh on

FPIs offload `14,800-cr worth equities in Jun

Foreign investors withdrew nearly Rs14,800 crore from domestic stocks in the first week of this month, influenced by India’s Lok Sabha election results and attractive valuations of Chinese stocks.

The outflow came following a net outflow of Rs25,586 crore in May on poll jitters and more than Rs8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields. Before that, FPIs made a net investment of Rs35,098 crore in March and Rs1,539 crore in February, while they took out Rs25,743 crore in January, data with the depositories showed. From a medium to long-term perspective, the direction of interest rates will remain a key driver for foreign investment flows into the Indian equity markets. According to the data, Foreign Portfolio Investors (FPIs) made a net withdrawal of Rs14,794 crore this month (till June 7).

The general election results in India significantly influenced foreign investor flows in Indian equity markets in June. Last week began optimistically as exit polls indicated a decisive victory for the BJP and the NDA government, Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said. However, the actual results diverged considerably from these expectations, leading to a reversal in market sentiment, thereby triggering a massive outflow by foreign investors. Foreign investors were also seemingly concerned by the fact that no party could get a clear majority in this parliamentary election, which would have prompted them to adopt a wait and watch approach, he added.

“FPIs regard Indian valuations to be very high and, therefore, capital is getting shifted to cheaper markets. The FPI pessimism regarding Chinese stocks appears to be over and there is a trend of investing in Chinese stocks listed in the Hong Kong Exchange since the valuations of Chinese stocks have turned very attractive,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

On the other hand, FPIs invested over Rs4,000 crore in the debt market.

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