Comments
Overseas investors pulled out a net ₹9,103 crore from the Indian markets in April so far, as the Covid-19 crisis triggered a return to safe haven assets like gold and dollar-denominated securities.
As per latest depositories data, foreign portfolio investors (FPI) withdrew a net sum of ₹2,951 crore from equities and ₹6,152 crore from the debt segment between April 1-9. The total net outflow stood at ₹9,103 crore.
In the previous month, FPIs had withdrawn a record amount of over ₹1.1 lakh crore on a net basis from the Indian markets (both equity and debt). The capital outflow in March was the highest withdrawal ever since FPI data has been made available on National Securities Depository Ltd.
Related Stories
Liberalised investment limits have not stemmed FPI exodus from Indian debt
Perhaps this shows that bulk of these investors are of the speculative and not fundamental variety, who were essentially looking to make quick gains from betting on rate arbitrage“As Covid-19 pandemic worsens across geographies, the disruption to the global economy is inevitable. The pandemic has adversely impacted investor sentiment and infected the markets globally. Emerging markets have been worst hit with foreign investors marching out from there to take shelter in safer investment avenues. India has been among the worst hit in the emerging market basket. Enhanced volatility can be seen in both the markets with equity markets falling sharply and yields in the fixed income segment moving up significantly,” said Himanshu Srivastava, senior analyst manager research, Morningstar India.
Harsh Jain, co-founder and COO at Groww noted that FPI investments in the equity category have been positive in the last two trading sessions of April and this can be explained by the sentiment in European markets changing on hopes that the virus is nearing its peak. He further said an inflow of around USD 7 billion is likely as the weight of Indian stocks has increased in the MSCI index.
FPIs ‘bound to return’
According to Srivastava, though the broader trend continues to be negative, this week the quantum of net outflow was much lower compared to the previous few weeks.
During this holiday-truncated week (between April 6-10), with just three trading sessions, “FPIs withdrew net assets worth USD 457.5 million from the Indian markets. This was significantly lower than the net outflow of USD 1.7 billion recorded in the previous week.”
Net outflows continued from the Indian fixed income markets with investors preferring safer dollar denominated asset classes, or safe havens like gold, as against fixed income securities of emerging markets like India where risks are relatively higher, Srivastava added.
“FPIs are exiting emerging markets at every level. However, once there is semblance of control over Covid-19 virus, foreign portfolio flows are bound to return to emerging markets in general and India in particular.”
“Hopefully, in six months’ time, when the economic picture is clearer, FPIs will see India as a strong revival story, on the back of its largely self-reliant economy, beneficiary of low oil price and falling interest rates. The expected increased weightage in MSCI index, in the near future, will also support favourably,” said Amar Ambani, senior president and head of research at Yes Securities.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.