FPIs pull out $4bn

• HDFC securities
• 30 Oct 2018
• Knowledge Centre

In a deliberate move to play safe, investors have exited emerging markets such as India to invest in safe-haven US bonds. Equities sold equities to the tune of Rs 19,810 cr during the Oct 1-19 period, and bonds worth Rs 12,167 cr, taking the total to Rs 31,977 cr.

 

Foreign investors have pulled out Rs 32,000 cr from the Indian capital markets in the first three weeks of October 2018, owing to the ongoing global trade tiff between the US and China. This move has led to rising crude prices and higher US Treasury yields. This is substantially higher than the net outflow of Rs 21,000 cr witnessed in September 2018. Prior to that, overseas investors had plowed in a net amount of Rs 7,400 cr in the country’s capital markets in the July-August 2018 period.

 

Data shows that they sold equities of Rs 19,810 cr between October 1-October 19, and bonds worth Rs 12,167 cr, taking the total to Rs 31,977 cr.

 

FPIs have largely been net sellers for the most part of this year. Their sales have been more pronounced in the bond markets. So far this year, they have sold over Rs 33,000 cr of equities and Rs 60,000 cr of bonds.

 

The sentiment was also dampened by the International Monetary Fund (IMF) downgrading the outlook for the world economy to 3.7% growth earlier this month.

 

Market experts are of the view that equities are likely to remain under pressure, as corporate results have not been extraordinary even as there were other headwinds such as crude prices and upcoming elections in a few states, followed by the general elections in 2019. The worry is that if the BJP fares poorly in the state polls, it may resort to populist measures. Availability of liquidity to NBFCs is another concern as this could affect their growth.