Global Risk-Off Spurs FPI Exodus from India, Not Weak Fundamentals: Expert

Ross Maxwell, Global Strategy Operation Lead at V T Markets, in an exclusive conversation with ANI, stated that the recent outflows from Indian markets are largely driven by a broader global "risk-off" environment rather than concerns specific to India's economic strength.

"I think it comes back down to just this risk-off environment... it's more capital preservation. It's moving away from riskier assets and into safe havens," Maxwell said, explaining the ongoing foreign investor behaviour.

He added that emerging markets like India tend to face higher outflows during periods of global uncertainty due to their exposure to external risks and volatility.

"Investors are moving out of equities, especially some emerging markets which are more susceptible to potential damages and escalation," he noted.

According to data from National Securities Depository Limited, foreign portfolio investors (FPIs) have significantly stepped up selling in Indian equities amid rising global uncertainties. FPIs sold equities worth Rs 1,17,775 crore in March alone, and in just the first two trading days of April, they have already offloaded shares worth Rs 19,837 crore.

This marks one of the highest recent bouts of selling by foreign investors, reflecting a strong risk-off sentiment in global markets.

Despite the outflows, Maxwell emphasised that India's domestic fundamentals remain strong.

"Fundamentally, especially in places like India, like fundamentally domestically, demand is still strong. You know, they're still in a good position from a fundamental point of view. All of the current losses in the stock markets are very much linked to the issues within the geopolitical issues," he said.

The expert further highlighted that much of the recent correction in stock markets is linked to geopolitical developments rather than underlying economic weaknesses.

"All of the current losses in the stock markets are very much linked to the geopolitical issues," he added.

The ongoing tensions in West Asia have pushed global crude oil prices higher, which has added pressure on oil-importing economies like India. Higher oil prices tend to increase inflation, widen current account deficits and weaken local currencies, thereby impacting investor sentiment.

Maxwell explained that countries such as India, Japan and South Korea, which are heavily dependent on imported crude oil, are particularly sensitive to such developments. Rising oil prices increase demand for the US dollar, leading to currency depreciation and higher costs for companies, which are eventually passed on to consumers.

According to Maxwell, the future trajectory of markets will largely depend on how the geopolitical situation evolves. If tensions ease and oil prices stabilise, investor confidence could return quickly.

"I would actually expect if there is an easing of tensions, investors will flock back to those equities... those flows can come back into emerging markets," he said.

He added that the current situation is fluid and markets are reacting to headlines, making it important for investors to stay cautious and adaptable.

- ANI