fpi outflows: FPIs as well as stocks become net sellers in the debt market after one year. What is stress?

As global macroeconomic concerns continue to bother foreign investors, FPIs recorded net selling not only in the Indian stock market but also in the bond market for the first time since March last year.

“The main trend in FPI activity this month is that FPIs have turned sellers into debt after months of continuous buying. From April to 20, FPIs sold debt worth Rs 12,885 crore, which in turn is a huge drop in US bonds. There are concerns about rising yields and depreciation of the rupee,” said Dr VK Vijayakumar of Geojit Financial Services.

Higher U.S. Treasury yields and the rupee falling to record lows prompted foreign investors to liquidate some of their positions, selling nearly $1.3 billion worth of government bonds in April.

India’s benchmark 10-year bond yield ended the week 5 basis points higher compared to a 6 basis point rise last week. This is the third consecutive year that yields have risen as investors worry about rising tensions in the Middle East and the timing of a Federal Reserve interest rate cut.

The Indian rupee fell about 0.1% against the US dollar to 83.4700, recording a decline for the second week in a row.

The Indian stock market also saw a large sell-off in the spot market due to higher-than-expected US inflation and the resulting surge in bond yields (US 10-year bonds rose more than 4.6%). “Now, total FPI flows in April have come down to Rs 5639 crore. It was FPI investments through the primary market of Rs 22,092 crore that enabled the total capital flow to reach Rs 5,639 crore. The FPI sold stakes worth Rs 16,452 crore through exchanges. This kind of massive selling happens whenever US bond yields spike more than expected,” Vijayakumar said. 39 small-cap stocks rose by double digits this week

Market data shows that FPI has taken a hit in the IT sector in anticipation of poor fourth-quarter results. They also sold FMCG and consumer durables and bought stocks in sectors such as automobiles, capital goods, telecom, financial services and power.

In the derivatives sector, the proportion of index futures purchases by foreign investors is 35%, while the put-call ratio is 1.03, suggesting a bullish bias.

Analysts expect volatility to remain high next week, citing weak global signals and the ongoing earnings season.

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