FPIs pulling out of stocks but stepping up investments in debt instruments

FPIs had withdrawn a whopping Rs 24,548 crore from Indian equities during October which resulted in the stock markets turning volatile. The exit of foreign funds was triggered by a sharp rise in US bond yields and the geopolitical uncertainty created by the Israel-Hamas war.At the same time FPIs had invested Rs 6,382 crore in the Indian debt instruments during October which were considered relatively less risky. The trend appears to be continuing as FPIs have already invested Rs 6,053 crore in debt in the first 10 days of November.FPI investment is considered "hot money" as it can flow out suddenly causing the stock market to crash and weakening the local currency which turns volatile.The Indian rupee has hit its lowest level in recent weeks, both due to the rise in crude prices which have increased the demand for dollars and the sudden exit of FPI funds from the stock markets.Market analysts are of the view that although there is still a net outflow of FPI funds from Indian stocks the pace has slowed compared to last month.--IANSpannu/pgh

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