FPI Outflows Likely To Be Short-Lived: ICICI Securities

ICICI Securities Report

Outlook for institutional flows:

U.S. 10-year bond yields have been oscillating around the 4% mark (3.4-4.3%) over the past one year as the Fed approaches the end of its jumbo rate hike cycle driven by a moderating inflation outlook.

The most recent surge in U.S. yields from ~3.75% to ~4.3% was triggered by the rating downgrade by Fitch and is putting pressure on foreign portfolio investment flows towards India. However, the U.S. 10-year bond yield is likely near its upper range given the outlook for inflation.

This should alleviate concerns around FPI outflows even as structural domestic equity flows in India continue to be positive as evidenced by record-high SIP flows.

Growth outlook for India relative to China continues to be robust driven by a strong investment and real estate cycle supported by low non performing assets in the system.

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