Enforcement the key
India continues to attract foreign investors who bet heavily on the country’s growing population, rising consumer market, and a young and dynamic labour force.
In May, foreign investors pulled out a massive Rs 17,000 crore from Indian equities in the first 10 days of the month.
The pullout was due to the general election and the uncertainty surrounding its outcome, coupled with expensive valuations and profit booking.
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According to the data with the depositories, Foreign Portfolio Investors (FPIs) experienced a net outflow of Rs 17,083 crore in equities this month (till May 10).
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Notably, this was way higher than a net withdrawal of Rs 8,700 crore during April. FPIs made a net investment of Rs 35,098 crore in March and Rs 1,539 crore in February.
Looking ahead, post-general election, corporate India’s strong financial performance in Q4 FY24 is anticipated to be rewarding.
On the global front, the US Fed has indicated no rate cuts until inflation cools, thus raising scepticism over the possibility of an early rate cut. Further, the data said that the FPIs withdrew a net amount of Rs 14,860 crore from equities in 2024 so far.
They, however, invested Rs 14,307 crore in the debt market. The volatility index, also known as a fear gauge, touched 18.4 (the highest this year) this past week as equity benchmarks saw sharp corrections in both benchmark indices and broader markets.
So far in May this year, Nifty50 is down 2.5 per cent, falling 500 points. The fear gauge had hit a low of 10.2% on April 23 this year.
Analysts, however, noted that Vix surge so far is much lower in the latest general election as compared to the 2019 and 2014 editions.
Experts also noted that this aggressive selling by FPIs may have been prompted by worries and murmurs about the low voter turnout in first three phases of the general election and whether the ruling alliance will get the number of seats earlier anticipated.
Another anticipated reason could be profit booking by FPIs in anticipation of a market correction,
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