War, inflation trigger FPI exodus, Rs 1 trillion pulled out in just three months

Overseas investors have pulled out a net Rs 1,14,855.97 crore from the Indian markets in the current year so far, amid heightened geopolitical tensions and inflation concerns.

Foreign portfolio investors have sold domestic equities worth Rs 48,261.65 cr so far this month, taking the year-to-date tally this year to a massive Rs 1,14,855.97 cr, as per depositories data. The exodus of foreign investors was largely owing to inflationary pressures and deepening global macroeconomic conditions following the Russia-Ukraine war, experts said. This is for the sixth straight month that foreign institutional investors have offloaded their holdings on a net basis in the Indian equity market. Foreign portfolio investors (FPIs) fear that India would be impacted more by commodity price hikes, particularly in crude oil, since India is a major importer.

“While Russia-Ukraine war has limited the direct impact on the Indian economy, given our lower dependence of imports from these countries, higher commodities inflation poses a key risk both in terms of macro parameters such as the balance of payments and inflation as well as corporate earnings estimates on account of higher input costs,” said Shibani Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company.

As per depositories data, foreign investors pulled out Rs 28,526.30 crore from Indian equities in January, Rs 38,068.02 crore in February and Rs 48,261.65 crore in March so far.