Foreign portfolio investors (FPIs), who withdrew record amounts of money from Indian equities in 2021–22, extended their sell-off in the most recent fiscal year as well, withdrawing Rs 37,631 crore amid aggressive rate hikes by central banks around the world.

The outflow trend is likely to reverse in the current financial year since India has the best growth potential in the financial year 2023-24 (FY24), VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Market analysts believe that FPI flows in the current financial year would be decided by a host of factors, such as the US Federal Reserve's policy stance, oil prices movement and development in the geopolitical situation. Since FPIs started investing in 1993, this is the first time they sold consecutively for two financial years. They sold equities worth Rs 1.4 lakh crore in FY22. However, the pace of selling slowed down to Rs 37,632 crore in FY23, data with the depositories showed. Before these outflows, FPIs invested a record Rs 2.7 lakh crore in equities in 2020-21 and Rs 6,152 crore in 2019-20.

 In the financial year 2022-23, most of the major central banks started hiking the interest rate, which resulted in the departure of hot money from emerging markets, including India. This resulted in an unprecedented rise in prices (inflation) in most economies. Apart from global monetary tightening, volatile crude and rising commodity prices, along with Russia and Ukraine conflict, led to an exodus of foreign money in 2022-23.

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