FPIs adopt cautious stance ahead of Budget; take out ₹17,000 crore from equities in January

The outflow in January came after a net inflow of ₹11,119 crore in December and ₹36,239 crore in November

Foreign investors have pulled out a net of over ₹17,000 crore this month so far due to the attractiveness of the Chinese markets and the cautious stance adopted by them ahead of the Union Budget and U.S. Federal Reserve meeting.

The outflow in January came after a net inflow of ₹11,119 crore in December and ₹36,239 crore in November.

Overall, foreign portfolio investors (FPIs) have pulled out ₹1.21 lakh crore from the Indian equity markets in 2022, following aggressive rate hikes by the central banks globally, particularly the U.S. Federal Reserve, volatile crude, rising commodity prices and the Russia-Ukraine conflict.

For FPIs, 2022 was a subdued year in terms of flow and withdrawal from equities after a net investment in the preceding three years.

According to the data with the depositories, FPIs have made a net withdrawal of ₹17,023 crore this month (till January 27).

Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, said that FPIs are adopting a cautious stance, as they are apprehensive ahead of the US Federal Reserve meeting and the Union Budget on February 1. The Fed's monetary policy committee will meet from January 31 to February 1. Also, FPIs have been focusing on China after its markets reopened after the lockdown. Under its zero COVID policy, China was enforcing rigorous lockdowns to reduce the number of cases. As a result, Chinese markets declined, making them more appealing from a value standpoint, Srivastava said.

This caused FPIs to shift their focus from economies with relatively high valuations like India to China, he added.