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In January 2024, the Indian equities market saw a withdrawal of over $3 billion by foreign portfolio investors (FPIs) as a result of reduced risk exposure due to higher treasury yields and larger-than-anticipated returns from private lenders.
In fact, overseas investors sold more Indian shares in January than in any other emerging market. While India witnessed outflows worth $3.2 billion, they sold Brazilian shares worth $1.1 billion and offloaded $870 million worth of shares from Thailand.
South Korea attracted $2.3 billion in inflows, and Taiwan also saw some buying to the tune of $1.4 billion, according to Bloomberg data.
In fact, overseas investors had sold shares in the January months of both 2023 and 2022 as well. While FPIs withdrew $3.7 billion in January last year, they did the same in 2022 by withdrawing $4.8 billion from the Indian market. However, the selling of stocks by foreign investors in January comes after heavy buying witnessed in the preceding two months.
After buying $2.3 billion worth of shares in November, FPIs had poured in a little over $7 billion in December, taking the total tally in 2023 to $21.4 billion.
The yield on the 10-year US Treasury bond surged 13 basis points (bps) in January to 4%. After hitting a low of 3.8% in December, the yield had reached a high of 4.2% on January 24.
Nevertheless, it is important to note here that nearly a third of the foreign portfolio investors' money has been parked in the financial services sector. The assets under custody (AUC) in financial services at the mid of January stood at $237 billion, as per data compiled from National Securities Depository Ltd (NSDL), whereas the total AUC of FPIs in equity stood at $758 billion as of January 15, 2024.
However, purchases by domestic institutional investors (DIIs) to the tune of $3 billion during the month limited losses in the benchmark index. The Nifty50 ended the month marginally lower at 21,725.70 points, down 0.03%.
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