The selling by foreign investors of Indian equities has now spilled over the fifth consecutive month in February with the FPIs selling Indian equities worth ₹21,362 crore till now.
The foreign investors have been on a selling spree for five straight months now, reaching the highest level of selling of Indian equities even more than seen during the global financial crisis.
In these 5 months (including Feb till date), the FPIs have sold as much as ₹93,456 crore since October 2021. Before these current 5 months, the highest level of selling by foreign investors was witnessed during the global financial crisis in 2008 when they sold ₹44,378 crore between May-November 2008.
In January 2022 alone, FPI outflows stood at ₹33,303 crore, the highest level since March 2020, when this figure was ₹61,973 crore.
Along with the rapidly escalating geopolitical tensions between Russia and Ukraine, surging inflation and expectations of an aggressive interest rate hike by the US Fed also triggered massive losses in Indian markets as foreign investors continued to withdraw money.
BofA's US economists are now expecting seven rate hikes in the calendar year 2022 (CY22), starting March 2022. It expects US Fed to hike rates by 100 bps and 175 bps in FY22 and FY23, respectively.
This aggressive rate hike scenario also led BofA Securities to cut Nifty50's target by 2,100 points for December 2022 to 17,000 from 19,100 earlier.
Adding to the weak cues, oil prices surged to over $100 per barrel further causing inflation concerns. Russia is one of the world’s top producers of crude oil any financial and economic sanctions imposed by Us and UK on Russia would disrupt the oil supply from one of the largest oil producers.
Meanwhile, FII stake in Nifty-500 also fell to a six-quarter low of 20.6 percent in the December 2021 quarter. This has been the fourth consecutive quarter of decline. In the September 2021 quarter, this figure stood at 21.5 percent.
The majority of the selling by FIIs in the December quarter was seen in the private banks, with their holdings falling to 20.1 percent in the December quarter from 21.3 percent in the previous quarter.
Foreign investors were net buyers for 6 months in 2021 - Jan, Feb, March, June, August and September.
In 2021, FIIs bought Indian equities worth ₹27,755 crore in September, the highest during the year and sold the most Indian equities worth ₹29,702 crore in December, followed by in October.