Foreign Institutional Investors (FPIs) sold Indian stocks worth ₹2,824 crore on Tuesday and ₹4,652 crore on Monday. In the last five trading sessions, they have withdrawn ₹12,582 crore from Indian equities. In contrast, Domestic Institutional Investors (DIIs) made a meagre investment of almost ₹4,000 crore during the same time period.
In July, FPIs turned net buyers after nine straight months of massive net outflows, which started in October last year. Between October 2021 and June 2022, they sold a massive ₹2.46 lakh crore in the Indian equity markets. While the DIIs have invested ₹1.94 lakh crore in the same time frame, Trendlyne data showed.
After FPIs made a u-turn in July by investing nearly ₹5,600 crore, the Nifty rallied 8.60% and the Sensex gained 8.56%. In addition to that, the Indian markets outperformed most of its global peers in the same month. July stands as one of the best months for the markets since August 2021 and November 2020, respectively.
Similarly, the Nifty delivered 3.50% return and the Sensex gained 3.42% in August after FPIs infused nearly ₹51,000 crore.
However, much of this is now reversing as major central banks continue to raise interest rates with no sign of abating.
As the FPIs turned bullish on Indian stocks for the second consecutive month, the global brokerage firm, BofA Securities, in August raised its Nifty forecast in the range of 18,500-19,500 points by December after two consecutive downward revisions.
Elsewhere, the Indian rupee has fallen to unexpected levels over the past four trading days. On Wednesday, it reached a record low of 81.93 against the US dollar, surpassing its previous low of 81.77 marked on Tuesday.
Meanwhile, the RBI rate-setting panel will start its 3-day deliberations on Wednesday amid expectations of yet another rate hike of 50 basis points to check high inflation, in line with similar actions taken by other major central banks, including the US Fed, PTI reported.
The spread between the US rate hike and the RBI has increased to 160 basis points. So far this year, the US Fed has raised rates to 300 basis points (bps), while the RBI has raised rates by 140 basis points (bps).
India's retail inflation in August surged to 7% on an annual basis, up from 6.71% in July 2022. It remained above the Reserve Bank's comfort level of 6 percent for the eighth consecutive month.
Crude oil prices have dropped 40% from their March highs, providing some relief to the Indian economy, but the majority of the benefit has been taken away by the depreciating rupee.
The economists from SBI, UBS, Goldman Sachs, Barclays, and Bank of Baroda are forecasting that the RBI will deliver a 50 bps in the upcoming RBI's MPC bi-monthly monetary policy scheduled for September 30. The Reserve Bank of India has raised interest rates by 140 basis points this year, to 5.40 percent.
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