FPIs Pull ₹14,800cr from Indian Equities in June Amid Election Results and Attractive Chinese Stocks

Foreign Portfolio Investors (FPIs) pulled out nearly ₹14,800 crore from Indian stocks in the first week of June. This was influenced by the Lok Sabha election results and more attractive stock valuations in China. This withdrawal follows an outflow of ₹25,586 crore in May due to election-related uncertainty and over ₹8,700 crore in April due to concerns over changes in India’s tax treaty with Mauritius and rising US bond yields.

In March, FPIs had invested ₹35,098 crore, and in February, ₹1,539 crore, but took out ₹25,743 crore in January, according to depository data.

Election Results

FPIs removed ₹14,794 crore from Indian stocks this month up to June 7. The election results had a big impact on FPI activity in June. Initially, optimism rose as exit polls suggested a clear win for the BJP and the NDA government, said Himanshu Srivastava from Morningstar. However, the actual results didn’t match expectations, leading to a change in market sentiment and a large withdrawal by foreign investors. Concerns about the lack of a clear majority in the parliamentary election also made FPIs cautious.

FPIs also found Indian stocks to be expensive and moved their capital to cheaper markets like China. V K Vijayakumar from Geojit Financial Services noted that FPIs are now investing in Chinese stocks on the Hong Kong Exchange due to their attractive valuations.

Positive Long-Term Outlook

On the other hand, FPIs invested over ₹4,000 crore in the Indian debt market in June. Earlier, they invested ₹13,602 crore in March, ₹22,419 crore in February, and ₹19,836 crore in January, driven by the expected inclusion of Indian government bonds in the JP Morgan Index.

Experts believe the long-term outlook for FPI investments in Indian debt is positive due to this inclusion in global bond indices, although near-term flows are affected by global economic uncertainty.

So far in 2024, FPIs have withdrawn a net amount of ₹38,158 crore from Indian equities but invested ₹57,677 crore in the debt market.