- Date : 18/07/2022
- Read: 3 mins
FIIs continue to withdraw money from Indian stocks
The year 2022 has come with many challenges for the stock markets. The world is battling record-high inflation levels, and the Russia-Ukraine war is contributing to the supply side issues. These supply-side issues are putting more pressure on inflation.
In response, the US Federal Reserve has hiked the policy rates. In the last meeting held in June, the Federal Reserve hiked the policy rates by 75 bps. Also, the RBI has hiked the repo rate by 90 bps this quarter. 40 bps was hiked in an unscheduled meeting, and 50 bps was hiked in June in a scheduled policy meeting of the RBI.
Related: The Effect of Inflation on Home Buying
FII Withdrawal
FIIs have been withdrawing this year from the Indian stock markets. The quantum of withdrawal has increased in the last two months. Here is the withdrawal of the FIIs from the Indian stock markets:-
As we can see above, the FIIs have been withdrawing massive amounts from the cash segment. The total amount withdrawn is a massive Rs 2,80,167.73 crores. Therefore, we can see that the FIIs have withdrawn a massive amount of money this year from the cash segment.
This withdrawal of money started in October of last year. The withdrawal for Oct-Dec 2021 is given below:-
Thus, we can see that the FIIs have been withdrawing their money from the Indian markets. But there has been a steady inflow of domestic money that has countered the withdrawal of FIIs. Even the honourable finance minister, Nirmala Sitharaman, praised the domestic investors for keeping the markets steady despite this massive withdrawal of money.
Related: Tips to Navigate Uncertainty During Rising Inflation
Reasons for FII exodus
The reasons for the FII exodus are mostly inflation and interest rate related. The reasons are summarized below:-
- An increase in interest rates by the US Federal Reserve puts pressure on the return on capital required.
- An increase in interest rates by the RBI puts pressure on the economy.
- High global inflationary scenario with high inflation worldwide.
- The Russia-Ukraine war is causing supply-side issues.
- The high valuation of many stocks in the Indian stock markets.
- The increasing bond yields for 10-year and 30-year bonds.
As per various experts, the stop in the rise of bond yields can provide some support to the markets and will likely be the bottom in equities. You should do your due diligence on navigating these volatile markets and take advice from your financial advisor.
Related: Investor's guide to managing money
The year 2022 has come with many challenges for the stock markets. The world is battling record-high inflation levels, and the Russia-Ukraine war is contributing to the supply side issues. These supply-side issues are putting more pressure on inflation.
In response, the US Federal Reserve has hiked the policy rates. In the last meeting held in June, the Federal Reserve hiked the policy rates by 75 bps. Also, the RBI has hiked the repo rate by 90 bps this quarter. 40 bps was hiked in an unscheduled meeting, and 50 bps was hiked in June in a scheduled policy meeting of the RBI.
Related: The Effect of Inflation on Home Buying
FII Withdrawal
FIIs have been withdrawing this year from the Indian stock markets. The quantum of withdrawal has increased in the last two months. Here is the withdrawal of the FIIs from the Indian stock markets:-
As we can see above, the FIIs have been withdrawing massive amounts from the cash segment. The total amount withdrawn is a massive Rs 2,80,167.73 crores. Therefore, we can see that the FIIs have withdrawn a massive amount of money this year from the cash segment.
This withdrawal of money started in October of last year. The withdrawal for Oct-Dec 2021 is given below:-
Thus, we can see that the FIIs have been withdrawing their money from the Indian markets. But there has been a steady inflow of domestic money that has countered the withdrawal of FIIs. Even the honourable finance minister, Nirmala Sitharaman, praised the domestic investors for keeping the markets steady despite this massive withdrawal of money.
Related: Tips to Navigate Uncertainty During Rising Inflation
Reasons for FII exodus
The reasons for the FII exodus are mostly inflation and interest rate related. The reasons are summarized below:-
- An increase in interest rates by the US Federal Reserve puts pressure on the return on capital required.
- An increase in interest rates by the RBI puts pressure on the economy.
- High global inflationary scenario with high inflation worldwide.
- The Russia-Ukraine war is causing supply-side issues.
- The high valuation of many stocks in the Indian stock markets.
- The increasing bond yields for 10-year and 30-year bonds.
As per various experts, the stop in the rise of bond yields can provide some support to the markets and will likely be the bottom in equities. You should do your due diligence on navigating these volatile markets and take advice from your financial advisor.
Related: Investor's guide to managing money
