The last financial year was bad in terms of foreign investment, FPI withdrew such a huge amount from the stock markets

FPI Data: The process of withdrawal of foreign portfolio investors (FPIs) from the Indian stock market continued in the last financial year (2022-23) as well. In the last financial year, FPIs made a net sale of Rs 37,631 crore amid aggressive hike in interest rates by central banks globally. Earlier in 2021-22, FPI had made a record withdrawal from the Indian stock market.

FPI sold in 2 consecutive financial years

Foreign portfolio investors started investing in the Indian stock market in 1993. This is the first time since then that FPIs have been net sellers for two consecutive financial years. In the financial year 2021-22, he sold shares worth Rs 1.4 lakh crore. According to depository data, the pace of their withdrawal has slowed down to Rs 37,632 crore in the financial year 2022-23. Earlier in 2020-21, FPI had invested a record Rs 2.7 lakh crore in shares. His investment in 2019-20 was Rs 6,152 crore.

What was the reason for the withdrawal of FPI investors?

In the financial year 2022-23, most of the major central banks started the process of increasing the interest rate, due to which money started flowing out of India and other emerging markets. This led to an unprecedented increase in inflation in most economies. Globally tightening monetary stance, fluctuating crude oil prices, high commodity prices and Russia-Ukraine conflict led to outflow of foreign capital.

Apart from stocks, FPIs also pulled out Rs 8,938 crore from the debt or bond market in the last financial year. Earlier in 2021-22, he had infused Rs 1,628 crore in the bond market.

What do financial market experts have to say?

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that the trend of FPI withdrawal is expected to reverse in the current financial year, as India’s best growth prospects are in 2023-24. Market analysts believe that FPI inflows in the current financial year will depend on several factors such as the policy stance of the US Federal Reserve, volatility in oil prices and geopolitical developments.

What is the belief of Morningstar India

Himanshu Srivastava, Associate Director-Manager Research, Morningstar India, said that even on the domestic front, the scenario is not encouraging. Rising inflation remains a cause of concern and to control it, the Reserve Bank has also increased the rates, which will affect the prospects of the growth rate of the domestic economy. He said that another important factor which led to the outflow from the domestic stock markets is its high valuation compared to other related markets.

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