Why are foreign investors withdrawing money from India and investing in China, withdrawing so much money from the stock market

Why are foreign investors withdrawing money from India and investing in China, withdrawing so much money from the stock market


FPI Investment: Foreign portfolio investors (FPIs) have withdrawn a net Rs 15,236 crore from equity markets so far this month amid growing attractiveness of China’s markets and concerns about the US economy going into recession. However, in the last four trading sessions, FPIs have been buyers. Earlier in December, FPIs had infused Rs 11,119 crore in the stock markets and in November Rs 36,239 crore.

Withdraw Rs 1.21 lakh crore from Indian stock markets in 2022

Overall, FPIs have pulled out Rs 1.21 lakh crore from the Indian stock markets in 2022. The main reason for this is the aggressive increase in interest rates by central banks globally, especially by the US Federal Reserve, volatility in crude oil prices, high commodity prices amid the Russia-Ukraine war.

2022 has been the worst year in terms of FPI investment. In 2022, he made a huge withdrawal from shares, whereas during the last three years he had made a net investment in shares. According to depository data, FPIs have made a net withdrawal of Rs 15,236 crore this month (till January 20). The main reason for the selling of FPIs is the aggressive reopening of Chinese markets after the lockdown.

Why are FPIs withdrawing money from the Indian market

Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said that due to the zero covid policy, China implemented a strict lockdown. Due to this the Chinese market came down. In such a situation, investing there has become more attractive from the point of view of value. He said that due to this FPIs are withdrawing from high valuation markets like India. Srivastava said that apart from this, there is a constant concern about the US economy going into recession, which has got further support from the disappointing US data.

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VK Vijayakumar, chief investment strategist, Geojit Financial Services, said, “The continued selling by FPIs is a bit surprising as the dollar index has been on a steady decline. The dollar index has come down from its 2022 peak of 114 to around 103 now. Falling Dollar suited for emerging markets and therefore India should have received investment.”

He said what is happening is that FPIs are investing heavily in cheap markets like China, Hong Kong, South Korea and Thailand and they are selling in relatively costlier markets like India. Apart from stocks, foreign portfolio investors have withdrawn Rs 1,286 crore from the debt or bond market this month.

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