Stock Market: ₹55,000 crore withdrawn in the month of May, know the complete inside story of this stir in Dalal Street

The month of May was full of ups and downs and turmoil for the Indian stock market. Amid claims of bullishness in the domestic stock market, Foreign Portfolio Investors (FPIs) have surprised everyone by huge selling on Dalal Street. According to the latest data, foreign investors have withdrawn a huge amount of about Rs 55,000 crore from the Indian market. The sudden withdrawal of such a huge amount has alerted the big market giants and the question floating in the minds of retail investors is what happened suddenly that foreign investors started withdrawing from the Indian stock market. Let us try to understand through experts the real story behind this big movement of the month of May.

After all, why did foreign investors sell so much and what was the main reason?

Market experts believe that many major global and domestic reasons are responsible for this historic sell-off by foreign institutional investors in the month of May. The biggest reason is considered to be the uncertainty regarding the interest rates of the US central bank Federal Reserve and increasing geopolitical tension at the global level. Along with this, the valuation of Chinese stock markets had become quite attractive and cheaper than the Indian market at this time, due to which foreign funds considered it better to move their profits out of India and towards China and other emerging markets. This big fund shift has had a direct and deep impact on the sentiment of the Indian market.

Election excitement and high valuations also increased the uneasiness of investors.

During May, the ongoing Lok Sabha elections in the country and the suspense over its results also made foreign investors a little cautious. Due to speculations being made in the market regarding political stability and future policies, big fund houses adopted the strategy of ‘wait and watch’ and started increasing selling in Indian stocks to reduce the risk. Apart from this, the valuation (PE Multiple) of the Indian stock market was hovering near its record high for some time now, due to which foreign investors considered it safer to book profits at higher levels.

What will be the future of Indian stock market and its impact on retail investors?

Even though foreign investors may have withdrawn a huge amount of Rs 55,000 crore from the market in the month of May, the Indian stock market did not completely collapse. The biggest shield behind this was our domestic institutional investors (DIIs) and crores of retail investors of the country, who continued to inject money into the market through mutual funds and SIPs. Experts say that this sale by FPIs can create immediate volatility in the market, but considering the strong foundation of the Indian economy, long-term investors have no need to worry about it. There is full hope that foreign investors will return home as soon as the situation becomes clear after the elections.