Foreign Portfolio Investors’ selling surpasses 2008 levels, now At $19.8 billion

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Last Updated11/03/2022

The war between Russia and Ukraine and higher oil prices have prompted foreign investors to take risk off the table as the country is heavily dependent on imports for meeting its oil requirements.

Foreign portfolio investors (FPIs) have sold more stocks since October 2021 than they did during the 2008 financial crisis at an aggregate level.
Between October and now overseas investors have dumped Indian stocks worth $19.8 billion, compared with $14.6-billion outflows between January 2008 to March 2009.

It consists of securities and other financial assets held by investors in another country.
FPI holdings can include stocks, ADRs, GDRs, bonds, mutual funds, and exchange-traded funds.
It does not provide the investor with direct ownership of a company's assets and is relatively liquid depending on the volatility of the market.
Along with foreign direct investment (FDI), FPI is one of the common ways to invest in an overseas economy.
FDI and FPI are both important sources of funding for most economies.

The war between Russia and Ukraine and higher oil prices.
The sharp jump in crude oil prices comes on top of already accelerating imports for India and will drive a jump in current account deficit.
Rupee, which plunged to record lows, has depreciated 2.6% against the greenback so far in 2022.
Financials and technology stocks, where FPIs park almost half of their money, witnessed massive selling.
Market participants are of the view that FPIs selling is unlikely to subside until the tension between Russia and Ukraine gets resolved.

The past instances of FPI exodus from India, selling generally eased when peak-to-trough outflows approached $8-$10 billion(exception: 2008 crisis).
Taiwan witnessed the highest selling by FPIs so far in 2022 totalling $15.7 billion, followed by India, which saw an outflow of $15 billion.