Foreign portfolio investors (FPIs) pulled out Rs 8,295 crore from the stock market on Friday when the benchmark indices plunged on heavy selling pressure triggered by the rising bond yields.
FPI flows into domestic equities in February amounted to Rs 25,787 crore. With this, the net FPI investment so far this year works out to Rs 45,260 crore, as per National Securities Depository Limited (NSDL) data. However, domestic institutions made net investments of Rs 1,500 crore.
According to analysts, FPI outflows are likely to increase if bond yields rise further. Traditionally, when bond yields rise, investors start reallocating their investments away from equities and into bonds as they are much safer. As bond yields rise, the opportunity cost of investing in equities rises and, therefore, equities become less attractive, analysts said.
From the debt market, foreign investors withdrew Rs 6,488 crore in February amid the rising bond yields.
Last Friday, the benchmark Sensex dove 1,939 points to 49,099.99 and the Nifty50 fell 568 points at 14,529.15 as investors sold off stocks across the board.