Foreign investors pull out US$3.05 bn from Indian equities in Oct-18

• HDFC
• 05 Nov 2018
• Knowledge Centre

HDFC, Tester

Spiraling crude oil prices and concern that the ongoing US-China trade dispute could escalate and impact the global economy further caused foreign investors to pull out US$3.05 bn from Indian equities in Oct-18. This is the highest in a month since the collapse of Lehman Brothers in 2008.

 

In 2018, foreign portfolio investors have been net sellers of Indian equities for 7 of 10 months, with sales for the year totaling US$5.06 bn. A similar trend was witnessed in 2008. Foreign investors sold Indian shares for 8 of the first 10 months, but the quantum of selling was much higher at US$10.3 bn, depository data showed. In the past 10 years, the only other year which saw foreign investors turn net sellers of Indian shares was 2009, following the collapse of the US housing market, when the global financial crisis was at its peak.

 

This time around, investors across the globe have become risk-averse, as signs of global economic growth faltering are becoming visible. In India, there are concerns of a widening current account deficit, rising inflation, and a slowdown in consumer demand. There is also fear that the Government may announce populist measures ahead of the elections in the coming year.

 

The US-China trade spat has resulted led to a slowdown in the world’s largest economies. These signs of slowing growth, coupled with a rise in US Treasury yields and rising interest rates in developed economies, prompted foreign investors to pull out money from most emerging markets this month.

 

According to data, the sectors that witnessed the highest sell-off were automobile, financial services, and information technology. In addition, the fear of a liquidity squeeze in the non-banking finance and housing finance companies persists on concerns of high exposure to the real estate sector, rising borrowing costs and uncertainty over the resolution of issues related to Infrastructure Leasing & Financial Services.