FPI inflows at six-month low, uncertainty likely to continue
NEW DELHI : Foreign portfolio investment inflows into the Indian markets slowed in August after robust flows from April to July due to worries about impending rate hikes in the US, resulting in higher bond yields and a stronger dollar. Inflows in August were the weakest since February. Fears about rate hikes have also triggered outflows from other emerging markets.
Portfolio inflow figures also include investments through bulk deals and the primary market. In the cash market, foreign portfolio investors (FPIs) were net sellers after three months of sustained buying, said V K Vijayakumar, chief investment strategist at Geojit Financial Services. Rising bond yields in the US and a strong dollar index are negative for capital flows, and this is the primary reason why FPIs have been sellers in the cash market, said Vijayakumar.
Profit booking in financials also contributed to FPI selling, he added. The uncertainty is likely to continue, said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd. “There is no clear trend.
The uncertainty has increased with the US job data not giving any clear indication towards the US Federal Reserve’s approach. The China factor remains another key worry," Khemka said. However, broader market participation remained strong, as indicated by block deals and private equity fund investments.
The market’s appetite also remains strong, as indicated by initial public offering (IPO) subscriptions, analysts said. While these are positives, market trends are likely to remain mixed. “Another rate hike will cast a shadow on currency and liquidity, and there are risks for a slide," said Khemka.
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