FPI: Foreign Investors Turn Net Sellers For Second Month Straight Amid Weak Rupee

Foreign portfolio investors have withdrawn funds worth Rs 1,586 crore from Indian stock markets in October and become net sellers for the second straight month amid the strong US dollar index, weak rupee, and tightening of monetary policy.

However, the volume of fund outflows has substantially declined this week with Indian stock indices giving sizable returns to investors. The Indian stock indices have jumped during nine out of the past 10 sessions.

In September, foreign investors sold Rs 7,624 crore worth of equities in India, data from National Securities Depository Limited showed. So far in 2022, they sold Rs 170,375 crore worth of stocks on a cumulative basis.

Barring July and August when they were net buyers, foreign portfolio investors (FPIs) had been selling equities in the Indian markets for a year, which started in October last year for various reasons.

Tightening monetary policy in advanced economies including rising demand for dollar-denominated commodities, and strength in the US dollar had triggered a consistent outflow of funds from Indian markets. Investors typically prefer stable markets in times of high market uncertainty.

Further, the consistent depreciation of the rupee and depleting Indian foreign exchange reserves also had a bearing on the weak market sentiments.

India's forex reserves have been depleting for months now because of RBI's likely intervention in the market to defend the depreciating rupee.

India's foreign exchange reserves during the week that ended on October 21 fell to a new over two-year low of USD 524.520 billion, a drop of USD 3.85 billion from the previous week.

During the week that ended on October 14, the country's forex reserves were at 528.367 billion, RBI data showed.

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