In January, Indian equity markets experienced significant outflows, marking the highest in Asia for the month. Foreign institutional investors (FIIs) withdrew a substantial $2.62 billion from Indian exchanges, highlighting a trend of cautious investor behaviour amidst various market factors.
Key Highlights
Indian equity markets witness the largest outflows in Asia during January, with FIIs (Foreign Institutional Investors) withdrawing $2.62 billion.
- Sensex dropped by 0.4 percent, while Nifty saw a minimal gain of 0.05 percent.
- Other Asian stock markets also suffered losses in January 2024. Hong Kong’s Hang Seng index dropped by 5.8 percent, China’s Shanghai index fell by 4.3 percent, South Korea’s Kospi index plunged by 9 percent, and Indonesia’s Jakarta index decreased by 4.2 percent.
- On the other hand, Japan’s Topix index and Nikkei index rose by 2 percent and 2.6 percent, respectively.
Factors Driving Record FII Outflows
This latest record-making outflow by Foreign institutional investors is attributed to subdued corporate earnings compared to valuations, instilling caution among investors. Additionally, HDFC Bank’s results and the surge in US treasury yields contributed to FII selling in Indian markets. Globally, market volatility heightened due to the Middle East situation’s impact on global growth and inflation.
This was also the largest FII withdrawal from India since January 2023, when they pulled out $2.8 billion.
What is FII?
FIIs (Foreign Institutional Investors) are investors or funds that invest in assets located in countries other than their own, such as hedge funds, mutual funds, pension funds, insurance companies, and investment banks.
They play a significant role in the Indian capital market, as they bring in capital and expertise and influence the market sentiment and direction. However, Foreign Institutional Investors can also cause volatility and inflation if they withdraw their investments suddenly, as they are driven by short-term returns and global factors.
SEBIs Norms For FIIs
The Securities and Exchange Board of India (SEBI) introduced enhanced disclosure norms in 2023 for FIIs holding substantial stakes in Indian equities.
SEBI’s enhanced disclosure norms for FIIs (Foreign Institutional Investors) are a set of regulations that aim to prevent the misuse of the FPI route by certain investors who may have ulterior motives, such as circumventing the takeover norms or disrupting the orderly functioning of the Indian securities market.
Indian Stock Market Outlook- 2024
Analysts anticipate continued volatility in Indian equities in the first half of 2024, influenced by impending elections and shifts in global central banks’ interest rate policies. Despite this, there remains a positive outlook on India, with potential for bargain buying during sell-offs.
Conclusion
The surge in outflows by Foreign Institutional Investors (FIIs) from Indian markets in January underscores the cautious sentiment prevailing amidst various market dynamics. Despite market volatility, analysts maintain a positive outlook on India, urging vigilance and strategic investment decisions amidst market fluctuations.
Source- moneycontrol.com
______________________________________________________________________________________
Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.