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Mint
6 days ago
- Business
- Mint
Why does a stronger US dollar spell trouble for Indian equities?
MUMBAI : Prolonged periods of a strong US dollar are often associated with underperformance in emerging market equities. In the month leading up to June end, when the US Dollar Index (DXY) fell 1.85%, the MSCI Emerging Markets Index—benchmark for global investors seeking exposure to developing emerging market economies—surged nearly 6%. But as the dollar index steadied through 28 July, EM gains also moderated, with the MSCI EM Index rising only 3.04%, according to Bloomberg data. Whether this poses a risk to foreign inflows into EM stocks is now anybody's guess. Prolonged periods of a strong US dollar are often associated with underperformance in emerging market equities. In the month leading up to June end, when the US Dollar Index (DXY) fell 1.85%, the MSCI Emerging Markets Index—benchmark for global investors seeking exposure to developing emerging market economies—surged nearly 6%. But as the dollar index steadied through 28 July, EM gains also moderated, with the MSCI EM Index rising only 3.04%, according to Bloomberg data. Whether this poses a risk to foreign inflows into EM stocks is now anybody's guess. EM inflows rose modestly to $967 million in the week ended 25 July from $173 million the previous week, yet well below the $2.3 billion average seen over the past four weeks, according to Elara Capital's 25 July report. How does the US dollar affect EM flows? When the dollar weakens, EMs attract more investor flows. The MSCI EM Index jumped about 17% in 2025 till 28 July against the DXY's 9.1% decline. 'A softer dollar was a major tailwind for inflows into EMs," said Sunil Jain, vice president at Elara Capital. However, the DXY has slightly steadied over the past two weeks and even saw a recovery last week, putting pressure on EM sentiment, he explained. Foreign investors offloaded Indian equities worth ₹96,972 crore between January and July 2025, a sharp reversal from the net inflow of ₹30,813 crore seen during the year-ago period. The DXY picked up momentum over the past three weeks, rising 0.69% in the week ended 7 July, 0.64% in the week ended 18 July, and 1.5% in this week ending 1 August, reflecting continued strength in the greenback. 'The rebound in the dollar can act as a drag on EM flows," said Nilesh Shah, managing director, Kotak Mahindra AMC. Aren't there other factors to consider? There are. Shah explained EM flows are a function of multiple factors, including currency. He said long-term investors also consider earnings growth, valuation, and current account or balance of payment position to allocate money. EMs attract money 'more on growth and less on currency view", he clarified. Even Ashish Gupta, chief investment officer of Axis Mutual Fund, said the weakening US dollar may not be the sole catalyst behind inflows into EMs. He pointed out that recession fears and trade-related uncertainty in the US have largely receded, reshaping the investor sentiment and thereby strengthening the case for investments into the US markets. 'The key US indices are again nearing their all-time high now, which suggests that money may be again gravitating back towards the US, potentially slowing inflows into EMs." On Monday, Nasdaq and the S&P 500 hit an all-time high of 21,202.00 and 6,401.07 points, respectively. What's the outlook? The DXY broke below its three-year support level of 100 in April 2025, triggering a surge in EM inflows. And a move back above the 100 level could threaten this trade, said an 18 July Elara Capital report. In its monthly letter to investors, the global investment firm UBS suggested reducing excess dollar exposure. 'We expect lower interest rates, combined with fears about political interference, to affect the US dollar," it said in a 1 August note. Even American investment firm JP Morgan highlighted in its 14 July note that while tactically, in the short term, the US dollar could firm up a bit, 'we believe it will remain under pressure in the medium term, in the second half, and that has historically led to imported inflation moving up".
Time of India
22-07-2025
- Business
- Time of India
India seen as safe haven amid global trade jitters, to lead 2025 growth: JP Morgan
India has emerged as a relatively safe haven among emerging markets amid ongoing global trade uncertainties, according to a recent report by JP Morgan. The financial major said India is benefiting from a combination of falling inflation, improved system liquidity, and reduced government borrowing—factors that are expected to support economic expansion, ANI reported. 'India: Falling inflation, enhanced system liquidity and lower borrowing to boost growth. Timely demand stimulus and support to urban household balance sheet,' the report noted. JP Morgan projected that India will record the highest GDP growth among all countries in its global universe in 2025. Growth is also being aided by demand-side stimulus and improving urban household finances. Additionally, a favourable monsoon and a rebound in the rural economy are contributing to the positive outlook. The report highlighted that India currently holds a 19 per cent weight in the MSCI Emerging Markets (EM) Index and has been assigned an 'Overweight' (OW) rating by the firm. Alongside India, JP Morgan's EM strategists remain constructive on Korea, Brazil, the Philippines, UAE, Greece, and Poland. While EM equities have witnessed substantial outflows since August 2023, the trend has recently reversed, with fresh inflows reflecting rising investor confidence. On the valuation front, the MSCI EM Index is trading on the cheaper side of fair value compared to developed markets. The report also noted that foreign exchange trends remain key to EM equity performance, as EM equities typically perform inversely to the US dollar. The recent weakening of the dollar—especially following tariff-related announcements—could further benefit EM assets. A positive shift in earnings forecast revisions was also highlighted. After prolonged downgrades over the past couple of years, the forecast revision index for EMs versus developed markets has started moving upward, pointing to a more optimistic earnings outlook. India's year-to-date (YTD) performance stands at 5.8 per cent in local currency terms and 5.7 per cent in US dollar terms. Though not among the top EM performers by absolute return, India's stability and economic trajectory continue to make it attractive for long-term investors. Overall, JP Morgan said improving macro fundamentals and supportive external conditions make India a market to watch among emerging economies. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Mint
22-07-2025
- Business
- Mint
FPI Heatmap: IT, FMCG lead outflows, while Services, Metals draw inflows in July. Here's where the smart money is going
Foreign portfolio investors (FPIs) turned net sellers in the Indian stock market in July 2025, marking a pause after three consecutive months of inflows. This shift comes after FPIs began FY26 on a positive note with cumulative net inflows of ₹ 38,673 crore in April, May, and June. As per NSDL data, FPIs withdrew ₹ 1,446 crore from the Indian equity markets during the first fortnight of July 2025. This compares with net investments of ₹ 14,590 crore in June alone. While FPIs continued to participate actively in the primary market — especially through Qualified Institutional Placements (QIPs) — they offloaded shares in the secondary market, citing stretched valuations and India's relative underperformance versus other emerging markets and the MSCI EM Index. After three straight months of steady inflows, foreign portfolio investors took a more cautious stance in July 2025, pulling out ₹ 1,446 crore from Indian equities during the first half of the month. The shift in sentiment was most evident in the secondary market, where FPIs trimmed exposure to sectors with elevated valuations and rotated funds into select cyclical and services-oriented plays. Information Technology (IT): The IT sector saw the largest outflow, with FPIs selling stocks worth ₹ 5,479 crore in the first fortnight of July, NSDL data showed. This is a sharp reversal from June, when the sector recorded net inflows of ₹ 1,166 crore — primarily in the latter half. Fast-Moving Consumer Goods (FMCG): FMCG stocks continued to face pressure, with FPI outflows of ₹ 1,428 crore in early July. This adds to the ₹ 3,985 crore that exited the sector in June, suggesting sustained bearishness driven by high valuations and muted consumption trends. Consumer Durables: The Consumer Durables segment saw net outflows of ₹ 1,292 crore in July's first half, following a ₹ 2,493 crore sell-off in June, indicating ongoing profit booking. Automobile and Auto Components: Autos sector faced ₹ 1,159 crore in net FPI selling, reversing the previous month's strong inflow of ₹ 4,724 crore, according to data on NSDL. Healthcare: Healthcare stocks witnessed FPI outflows of ₹ 757 crore in early July, continuing the trend from June, when the sector saw net selling of ₹ 403 crore. Services: The Services sector emerged as the biggest beneficiary of FPI inflows in July so far, with net buying worth ₹ 2,733 crore. This is a significant jump from ₹ 346 crore inflows seen in June. Metals & Mining: Metals & Mining saw a turnaround in sentiment, with FPIs pumping in ₹ 1,724 crore, compared to net outflows of ₹ 357 crore in June. The uptick may reflect a rebound in global commodity prices. Consumer Services: FPIs invested ₹ 953 crore in Consumer Services in early July, sustaining momentum from June's inflow of ₹ 1,348 crore, driven by a shift toward experiential and service-oriented consumption. Oil, Gas & Consumable Fuels: After drawing ₹ 6,137 crore in June, the Oil & Gas sector continued to attract FPI interest with ₹ 905 crore in net inflows. Capital Goods: Capital Goods received ₹ 922 crore in FPI inflows in July's first fortnight, partially offsetting the ₹ 1,831 crore net outflows recorded in June. This could signal renewed interest in infrastructure-related themes. Financial Services: The Financial Services sector remained resilient, attracting ₹ 820 crore in July after leading the June inflows with ₹ 8,946 crore. The sector continues to benefit from robust credit growth and strong Q1 earnings outlook. A clear pattern of sectoral rotation is visible in FPI flows between June and July. Investors appear to be moving away from defensives like FMCG, IT, and Healthcare, while increasing allocations to cyclicals such as Metals, Capital Goods, and Services. The growing interest in primary market offerings and selective positioning in undervalued sectors suggests FPIs are adopting a more nuanced, valuation-conscious approach amid global uncertainty and rising geopolitical risks. With Q1 results season underway and global central bank actions in focus, FPI flows in the coming weeks will likely remain sensitive to both domestic performance metrics and external macro triggers. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Economic Times
12-07-2025
- Business
- Economic Times
FPI outflows at Rs 1 lakh crore in 2025 so far; Rs 555 crore pulled out in July alone
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel For 2025 so far, inflows show a negative figure of Rs 1,00,443 crore, highlighting sustained selling pressure from foreign investors, especially during January and the latest sign of weakness, Foreign Portfolio Investors (FPIs) have pulled out Rs 555 crore from Indian equities in July up to the 11th, according to NSDL data. This marks the first monthly outflow after three straight months of positive inflows in April, May, and Vijayakumar, Chief Investment Strategist at Geojit Financial Services , noted, 'There are signs of FPI inflows weakening. After three months of positive inflows, FPI has turned negative, though marginally, so far in July.'He attributed the latest trend to the earlier heavy selloff in January and February, and said, 'The first three months of this year, FPI inflows were negative and this trend was reversed in the next three months.'Despite selling on the secondary markets, FPIs remained active in the primary market. 'An important trend in FPI investment is that FPIs have been consistent buyers/investors in the primary market even when they have been selling through the exchanges,' Vijayakumar the outflows in July, he said, 'FPI selling in July after three months of buying can be attributed to the recovery in the market from the March lows and the consequent elevated valuations. Since other markets are cheaper relative to India, FIIs may again sell and move money to cheaper markets as a short-term strategy.'In the broader global context, India has not been a top performer among emerging markets. 'In H1 2025, the Indian market underperformed most markets, including the MSCI EM Index,' he read: TCS, Bharti Airtel, among 78 stocks approaching record dates for dividends, bonus issue, stock splits (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Time of India
12-07-2025
- Business
- Time of India
FPI outflows at Rs 1 lakh crore in 2025 so far; Rs 555 crore pulled out in July alone
For 2025 so far, inflows show a negative figure of Rs 1,00,443 crore, highlighting sustained selling pressure from foreign investors, especially during January and February. In the latest sign of weakness, Foreign Portfolio Investors (FPIs) have pulled out Rs 555 crore from Indian equities in July up to the 11th, according to NSDL data. This marks the first monthly outflow after three straight months of positive inflows in April, May, and June. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Treatment That Might Help You Against Knee Pain Knee pain | search ads Find Now Undo VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services , noted, 'There are signs of FPI inflows weakening. After three months of positive inflows, FPI has turned negative, though marginally, so far in July.' He attributed the latest trend to the earlier heavy selloff in January and February, and said, 'The first three months of this year, FPI inflows were negative and this trend was reversed in the next three months.' Despite selling on the secondary markets, FPIs remained active in the primary market. 'An important trend in FPI investment is that FPIs have been consistent buyers/investors in the primary market even when they have been selling through the exchanges,' Vijayakumar added. Live Events Explaining the outflows in July, he said, 'FPI selling in July after three months of buying can be attributed to the recovery in the market from the March lows and the consequent elevated valuations. Since other markets are cheaper relative to India, FIIs may again sell and move money to cheaper markets as a short-term strategy.' In the broader global context, India has not been a top performer among emerging markets. 'In H1 2025, the Indian market underperformed most markets, including the MSCI EM Index,' he noted. Also read: TCS, Bharti Airtel, among 78 stocks approaching record dates for dividends, bonus issue, stock splits
