The Indian equity market saw an exodus of foreign portfolio investment (FPI) for seven of the 12 months in 2022. The first half of the year was particularly painful as global inflation rose with the Russia-Ukraine conflict, causing markets to fall worldwide. A rising dollar added to the pain for global markets, prompting investor wariness around equities.

FPIs withdrew Rs 33,303 crore from the equity market in January, while mutual funds invested Rs 16,488 crore amid fears of interest rate hikes by the US Fed. The conflict between Russia and Ukraine resulted in foreign investors withdrawing Rs 35,592 crore more from the market in February. 

March saw the rupee fall by 1% against the US dollar, crossing the Rs 77 mark. The first of many interest rate hikes by the US Fed triggered Rs 41,123 crore of share sales by foreign investors in the Indian market. The rate hike attracted investors to the US bond market, a less risky option compared to equities. April was comparatively better for the Indian market as FPI withdrawals eased to Rs 17,144 crore. 

FPIs outflow was at Rs 50,203 crore in June, the most in 2022, as a result of another interest rate hike (75 bps) by the US Fed. July and August brought relief – Rs 4,898 crore was invested in July amid optimism of the US Fed easing interest rates and India's consumer price index (CPI) falling more than expected to 7.01% from 7.04%. This was followed by an investment of Rs 51,204 crore more in August. 

Indian markets ended the year on a high note as FPIs invested Rs 11,119 crore in December. FMCG, consumer services and realty sectors saw the highest investments of Rs 4,019 crore, Rs 3,650 crore and Rs 3,248 crore respectively. FPIs are currently picking domestic-facing sectors like FMCG and banks, which are more immune to global upheaval. They withdrew Rs 2,784 crore and Rs 3,579 crore from oil & gas and information technology respectively.