This came after an influx of ₹32,365 crore in July and ₹26,565 crore in June, depositories data showed.
Foreign portfolio investors injected funds in these two months in anticipation of sustained economic growth, continuation of reform measures, a better-than-expected earnings season and political stability.
Before that, the FPI withdrew ₹25,586 crore in May on election jitters and more ₹8,700 crore in April due to concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields.
According to the data, FPIs withdrew a net amount of ₹21,201 crore worth of shares so far this month (August 1-17).
So far this year, FPIs have invested ₹14,364 crore worth of shares, depository data showed.
FDI outflows observed in August were driven mainly by a combination of global and domestic factors.
“Globally, concerns over the unravelling of the yen carry trade, a possible global recession, slowing economic growth and ongoing geopolitical conflicts led to market volatility and risk aversion,” said Vipul Bhowar, head of listed investments at Waterfield Advisors.
The outflow came as the yen carry trade unwound after the Bank of Japan raised interest rates to 0.25%.
Domestically, after being net buyers in June and July, some FPIs may have chosen to book profits following a strong rally in the previous quarters.
Moreover, mixed quarterly earnings and relatively higher valuations have made Indian stocks less attractive, Bhowar added.
Himanshu Srivastava, associate director of manager research at Morningstar Investment Research India, said the post-Budget announcement of a hike in capital gains tax on equity investments has largely fueled this sell-off.
Moreover, FPIs have been cautious due to high valuations of Indian equities, coupled with global economic concerns such as rising fears of recession in the US amid weak jobs data, uncertainty over the timing of interest rate cuts and unwinding of the yen carry trade, he added.
A significant trend in FPI flows recently, which became more evident in August, is the sustained selling by FPIs through the stock market while continuing to invest through the “primary market and others” category. This difference in FPI behaviour is due to differences in valuations.
“Primary market issues have comparatively lower valuations, while in the secondary market, valuations remain high. Hence, frontline investors buy when securities are available at fair valuations and sell when valuations rise in the secondary market,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
On the other hand, FPIs invested ₹9,112 crore in the debt market in August so far. This has pushed the figure to ₹1 lakh crore so far by 2024. ₹
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