Decline in FPI equity outflows despite rising bond yields in US

An interesting feature of the FPI trend recently is the decline in FPI equity outflows despite the rising bond yields in the US, says V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Normally when the US 10-year yield rises above 4.15%, the FPIs sell heavily. 

But this is not happening now. Since the DIIs, HNIs and retail investors are the dominant players now and their sustained buying is pushing the market to newer records, FPIs have taken a backseat, he said.

In February through 23rd, FPIs had net sold equity only for Rs 423 crore, sharply down from the January level, he added.

The resilience of the market is preventing the FPIs from selling aggressively despite attractive bond yields in the US. 

In debt, FPIs continue to be buyers having bought debt worth Rs 18589 crore in February so far, he said.

Strong economic growth, range bound crude prices and strong DII flows have mitigated the impact of FII selling during the past 2 months, as per a report by Prabhudas Lilladher.

Nifty has shown consolidation with upmove of 2.5% in past 6 weeks as RBI keeps policy rates unchanged with rising probability of no cuts by FED before end of 2Q (higher CPI), FII selling of Rs 316 billion amidst rising probability of NDA retaining power in 2024 general elections after strong show in state elections.

FII outflows have been Rs 316 billion CYTD while strong DII inflows of Rs 441 billion have negated the impact of FII selling and enabled 2.5% move in NIFTY CYTD, it added.