In May, over USD 4.6 billion (35,000 crore) worth of Indian stocks were sold by foreign investors, the highest in emerging markets, amid concerns over the possibility of a recession in markets in the United States, the rise in Interest rates and the strengthening of the dollar. This stream included its activities in both the secondary and primary markets.

On the bourses alone, foreign investors pulled more than Rs.41,000 from local stocks, the highest level in a month since March 2020, when they sold Rs.57,000 worth of shares in the pandemic-induced lockdown.

      

After selling in May, net outflows from the secondary market rose to GBP 1.73 billion so far in 2022, compared to GBP 6.57 billion of purchases in the primary market. In 2021, foreign portfolio investors (REITs) sold Rs.54,542 crore worth of shares in the secondary market but pumped 80,310 crore into the primary market.

According to HSBC, current REIT outflows are just below the level (as a percentage of market cap) seen during the 2008-09 global financial crisis. “With the end of easy money, the market's risk tolerance is low and that's not likely to change any time soon. Rising inflation and its persistence is the biggest local factor that will continue to weigh on the investment case from India,” said Amit Sachdeva. , Indian Equity Strategist at HSBC. 

Analysts expect REIT flows to remain volatile in the short term. “There's no question that emerging markets are starting to look more attractive for the money coming out from a positioning and valuation perspective, but until the underlying fundamentals change it won't be enough for volatility to drop or for people to take one again Interest in emerging markets investing,” said Sameer Goel, Global Head of Emerging Markets Research at Deutsche Bank.


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