The Foreign Portfolio Investors have once again turned away from Indian equities after having dumped stocks worth Rs 20,974 crore so far in September.
The selloff follows robust investments by FPIs in the months of July (Rs 20,200 crore) and August (Rs 29,631 crore) on a net basis, and according to analysts, was triggered mainly due to three reasons:
Fed Hike, US Bond Yield Surge
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The last FOMC meeting had given markets across the board an inflation-themed reality check. The Kevin Warsh-led raised its benchmark policy interest rate by 25 basis points to 3.75–4% for the first time in three years, broadly in line with Wall Street estimates amid inflationnary pressures from geopolitical risk premium.
The hike, albeit expected, spooked investors coupled with record surge in US treasury yields. The 10-year treasury yield, one of the world's most important interest rates hit the 5% all time high, recorded only once since the global financial crisis.
Oil On The Boil
Crude oil prices have continuously rallied, with only brief bouts of respite. Brent crude prices have remained above $100 per barrel for the better half of September. The rally took a breather when Saudi Arabia reportedly transported some crude via Strait of Hormuz to compensate for the closure of a key pipeline.
US-Iran War
The primary catalyst for all of this havoc remains the on-going (and seemingly never-ending) West Asia conflict between America and Iran. The war, which began in February of 2026, has rattled economies, markets and countries (along with their people) across the globe.
So far, there has been little to no indication of truce talks being resumed from either ends, making the conflict an ever bigger overhang for overseas investors and keeping them cautious regarding Indian equities as well.
What To Expect From FPIs Going Ahead?
The situation does not seem promising for foreign investments, at least in the short-run, according to industry experts and analysts.
"Don't count on flows to give markets much lift in the short term—it's going to be all about headlines and surprises. The first test is whether Friday's cautious rally in equities grows into a fuller recovery once the settled numbers come out," said Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth.
However, he added, investors will keep a keen eye on NSE listing on 24 September, which will show whether or not FPIs are still happy to back new deals.
Other numbers that traders will watch out for include India's September flash PMI, infrastructure output, forex reserves and then the usual round of US data—PMI, jobs, consumer stats.
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