Foreign Portfolio Investors Withdraw Over Rs 5,200 Crore from Indian Equities in April 2024

In April 2024, FPIs withdrew over ₹5,200 crore from Indian equities due to changes in the India-Mauritius tax treaty and rising US bond yields, highlighting the sensitivity of global investors to policy and economic factors.

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Dil Bar Irshad
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Foreign Portfolio Investors Withdraw Over Rs 5,200 Crore from Indian Equities in April 2024

Foreign Portfolio Investors Withdraw Over Rs 5,200 Crore from Indian Equities in April 2024

In April 2024, foreign portfolio investors (FPIs) withdrew over Rs 5,200 crore from Indian equities due to concerns over changes in the India-Mauritius tax treaty and rising US bond yields, despite significant investments in previous months. The net outflow of funds in the Indian equities stood at Rs 5,254 crore in the period under review.

The major trigger for the FPI selling was the tweak in India's tax treaty with Mauritius, which would now impose higher scrutiny on investments made in India via the island nation. Additionally, higher-than-expected US inflation and the consequent spike in bond yields led to big selling in the Indian market.

FPIs had been net buyers in Indian stocks for the third consecutive month until a few days ago in April. They sold stocks worth Rs 5,254 crore, according to NSDL data. The withdrawal was attributed to the ongoing geopolitical crisis in the Middle East, which likely pushed investors to take money off their portfolios.

Prior to this, FPIs had aggressively bought Indian stocks, accumulating over Rs 66,000 crore in December 2023 and over Rs 9,000 crore in November 2023, supported by factors like firm GDP growth forecasts, manageable inflation, political stability, and the central bank's monetary policy. However, they turned net sellers in January 2024 before turning net buyers again in February and March.

Why this matters: The significant withdrawal of foreign investments from Indian equities in April 2024 highlights the sensitivity of global investors to changes in tax policies and international economic factors. The outflow of funds can impact market sentiment and potentially influence the overall performance of the Indian stock market in the near term.

Apart from equities, FPIs also withdrew Rs 6,174 crore from the debt market during the same period. Despite the recent withdrawals, the total inflow for this year so far is Rs 5,640 crore in equities and Rs 49,682 crore in the debt market, driven by the upcoming inclusion of Indian government bonds in the JPMorgan Index. Sectors like IT, FMCG, and consumer durables saw selling, while FPIs showed interest in auto, telecom, capital goods, financial services, and power sectors.

Key Takeaways

  • FPIs withdrew over Rs 5,200 crore from Indian equities in April 2024.
  • Trigger: Changes in India-Mauritius tax treaty and rising US bond yields.
  • FPIs also withdrew Rs 6,174 crore from the debt market during the same period.
  • Total inflow for 2024 so far is Rs 5,640 crore in equities and Rs 49,682 crore in debt.
  • Sectors like IT, FMCG, and consumer durables saw selling, while auto, telecom, and others saw inflows.