FPIs Withdraw Amid U.S. Confidence Surge: Indian Markets Reel

Foreign Portfolio Investors continue their exit from Indian markets, driven by renewed U.S. economic confidence. Data shows substantial FPI outflows as U.S. interest rates rise and the dollar strengthens, impacting the Indian rupee and market sentiment. December's gains were short-lived with investments plummeting in 2024.

Foreign Portfolio Investors (FPIs) have been systematically offloading their assets in the Indian stock markets. According to the National Securities Depository Limited (NSDL), FPIs divested equities worth Rs 19,759 crore during the week spanning January 20 to January 24.

January alone witnessed an FPI pullout of Rs 64,156 crore from Indian markets. The exodus is largely linked to Donald Trump's re-emergence in U.S. politics, bolstering confidence in the U.S. economy. Trump's stance and efforts to enhance American livelihood have made the U.S. more enticing for global investors.

The repatriation of funds to the U.S. is further encouraged by increased U.S. treasury bond rates and a stronger dollar. These changes have made the U.S. marketplace more attractive, prompting investors to withdraw from emerging economies such as India. This substantial outflow has adversely impacted the Indian rupee, which has depreciated against the dollar, thus spurring further FPI sales.

Akshay Chinchalkar, Head of Research at Axis Securities, told ANI that about $7 billion has been retracted year-to-date. He highlighted several factors including Trump's expected second term, high U.S. treasury yields, and a thriving dollar as key reasons for the shift away from Indian investments.

While December ended on a high note, with net FPI investment in Indian equities at Rs 15,446 crore, the momentum couldn't sustain. 2024 saw a significant dip, with net investments dropping by 99% compared to the previous year, highlighting the challenges of emerging markets like India in securing foreign investment amid global market volatility.

(With inputs from agencies.)