FPIs turn buyers in debt space

Foreign portfolio investoRs(FPIs) withdrew over Rs12,000 crore from Indian equities this month so far, mainly due to a sustained rise in US bond yields and the uncertain environment resulting from the Israel-Hamas conflict. However, the story takes an intriguing turn on observing FPI activity in Indian debt as they have infused over Rs5,700 crore into the debt market during the period under review, data with the depositories showed. Going ahead, the trajectory of FPIs’ investments in India will be influenced not only by global inflation and interest rate dynamics, but also by the developments and intensity of the Israel-Hamas conflict, Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Adviser India, said.

Geo-political tensions tend to elevate risk, which typically hurts foreign capital inflows into emerging markets like India, he added. According to the data with the depositories, foreign portfolio investors (FPIs) sold shares worth Rs12,146 crore this month (till October 20). This came after FPIs turned net sellers in September and pulled out Rs14,767 crore. Before the outflow, FPIs were incessantly buying Indian equities in the last six months -- from March to August -- and bought shares worth Rs1.74 lakh crore.

The latest outflow appears to be in response to the current global uncertainties. Geopolitical issues, particularly the conflicts in Israel and Ukraine, have cast shadows of instability over international markets, prompting FPIs to adopt a cautious stance in the Indian equity arena, Mayank Mehraa, smallcase manager and principal partner at Craving Alpha, said.