Rising Crude and Bond Yields Trigger FPI Selling

Foreign investors have turned sellers again after nearly two months of buying, and for me, the important part is understanding what has changed globally rather than looking at the $1.6 billion selling figure alone. FPIs sold nearly $1.6 billion worth of Indian equities in five of the past six trading sessions after investing around $6.85 billion between mid-June and late August. The reversal has come alongside a sharp rise in crude oil prices and higher global bond yields. Crude is particularly important for India because we are a major oil importer. Higher oil prices can increase the import bill, put pressure on the rupee and add to inflation. At the same time, rising bond yields make developed-market fixed-income investments more attractive, which can reduce foreign investors’ appetite for emerging-market equities. Brent crude has now moved close to $100 per barrel. Another point that caught my attention is where global money is moving. Some foreign funds are rotating towards AI and technology themes in markets such as the US, Taiwan and South Korea. Strong activity in India’s primary market and upcoming large IPOs can also compete with secondary-market stocks for foreign capital. I would not consider a few sessions of FPI selling a trend by itself. What I would track from here is whether crude remains elevated, global yields continue rising and FPI outflows persist. If all three continue together, volatility in Indian equities could remain elevated. Learning Outcome: FPI flows are influenced by relative opportunities across global markets. Crude oil, bond yields, currency movements and valuations can collectively determine whether foreign capital moves into or out of Indian equities.