FPIs in exit mode as weak rupee eats into returns
Reliance Industries, HDFC Bank, Infosys and Tata Consultancy Services in the past one year. “Dollex returns clearly show that the weaker rupee has played spoilsport," Sharma said. “While India is in a relatively sweet spot than other emerging markets, the fact also is that many large-caps have hardly moved over the past two years, and while the mid-caps and small-caps have outperformed this year, their volatile nature leaves little room for FPIs to manoeuvre in." “The rupee can continue to remain under pressure if the Fed hikes the FFR (Fed Funds Rate) to rein in inflation in December or if crude tests the $100/bbl mark on worsening hostilities in West Asia," he added.
The worst dollar-adjusted returns are generated in years of steep rupee fall. For instance, the 11% depreciation in the local unit to 82.72 a dollar in 2022 from 74.47 in the past year caused the Dollex to fall 6.32% to 6,037 even as the Sensex rose 4.4% to 60,841. This year, though, the rupee has fallen less—0.39% to 83.04 through 2 November—resulting in less underperformance by Dollex compared with Sensex.
Rohit Srivastava, founder of IndiaCharts and Strike Money Analytics, agrees that weaker dollar returns have been the key reason for FPIs selling in the cash market since 2021. This doesn’t include their investments in the primary market. Data from Strike Money shows that FPIs sold shares on NSE’s secondary market for almost three years to date on the trot.
This includes ₹91,951 crore in 2021, ₹2.78 trillion in 2022 and ₹52,346 crore so far this year. Economists said predicting the course of the rupee remains a challenge, given the likely impact of the West Asia war on crude and persistently high US bond yields on EM currencies. Crisil chief economist
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