With global tensions triggered by US-imposed tariffs on imports championed by POTUS Donald Trump, foreign portfolio investors offloaded a staggering ₹21,272 crore in the first two weeks of February alone. Considering that the net outflow in January was ₹78,027 crore, this took the total outflow to ₹99,299 crore—just shy of ₹1 lakh crore.
Foreign portfolio investors, of which foreign institutional investors (FIIs) form a considerable chunk, provide a rough idea of local market sentiment from an international investor point of view.
Persistent foreign fund outflow means dipping investor sentiment. The lacklustre earnings season and the rising demand for the dollar enticed many an FII to shed a falling Indian market.
On Monday morning, the BSE Sensex slipped around 300 points to the 75,600 range, while the other benchmark index Nifty shed close to 120 points, pushing it to the 22,800 level. The indices showed no signs of arresting the dip and fell further as the day progressed.
The 30-share Sensex was battered by losses led by Mahindra & Mahindra, Tata Steel, Infosys, Tech Mahindra, TCS, and ICICI Bank. These ate into the gains championed by Bajaj Finserv, Asian Paints, Tata Motors, and IndusInd Bank.
Despite the US markets ending lower on Friday, major announcements regarding tariff rules by Donald Trump gained momentum. This also triggered foreign lenders and importers to buy dollars, pushing the rupee down to 86.76 vs the American currency in Monday morning trade.
Last week, the rupee had ended on a recovery streak, appreciating 21 paise to settle at 86.71 vs the dollar on Friday. According to market watchers, the FII outflow is expected to pressure the rupee in the coming days.
"Additionally, the RBI’s decision to double its government securities purchase target to $4.61 billion could impact liquidity conditions, influencing the rupee's trajectory," said Amit Pabari, MD of CR Forex Advisors.
V.K. Vijayakumar, the chief investment strategist at Geojit Financial Services attributed the increased FII selloff to lower-than-expected earnings season.
"The fact is that a modest single-digit earnings growth doesn't deserve high valuations. This is the basic reason behind the relentless FII selling which has impacted the market. Appreciating dollars aggravated the problem," Vijayakumar reasoned.
Further adding to the woes of an appreciating dollar and FII selloff, the Brent crude benchmark traded 0.05 per cent up at $74.78 per barrel on Monday.
