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Amidst fear of increase in coronavirus outbreak and the possibility of a global recession, foreign investors have pulled out more than ₹34,000 crore from Indian equities and bonds in March leading to a bloodbath in the stock market.
According to NSDL data, foreign portfolio investors (FPIs) pulled out close to ₹23,000 crore from equities in eight trading sessions in March, of which ₹10,500 crore went out in the last two days.
On the debt side, FPIs pulled out a net investment of ₹11,061 crore in March. On Thursday alone FPIs pulled out ₹7,950 crore.
“The markets have corrected sharply on back of huge FII selling that are moving out of equities across emerging markets. FIIs have become risk averse and are moving to safe havens," said Vikas Jain, Senior Research Analyst, Reliance Securities.
Stock market crash
Indian stock market suffered its biggest ever single-day crash in absolute terms on Thursday. The benchmark indice Sensex fell by 2,919 points or 8.2 per cent to close at 32,778, while Nifty shed 900 points to close below 9,590.
"The equity indexes slumped by almost 8 per cent on yet another day of sell off triggered by the deadly cocktail of the pandemic and the rising fears of a slowdown in global as well as domestic growth," said Joseph Thomas, Head of Research - Emkay Wealth Management.
FPIs have been a net buyers of Indian equities since September 2019. However, the foreign investors have turned net sellers from the last week of February as many countries (including India) have issued various travel restrictions and cancelled official events panicking the investors further.
On Wednesday, the World Health Organisation (WHO) declared the outbreak of Covid-19 (Corona virus) as a 'pandemic'.
On a year-to-date basis, FPIs are still net investors in the current fiscal with a net inflow of ₹45,151 crore in equities and Rs. 605 crore in debts. However, market experts predict that the market could crash further due to corona virus fear and economic slowdown, thus increasing the panic among foreign investors.
"The Nifty 50 index is down 22 per cent from its peak, and incremental pain cannot be ruled out as the sentiment metrics are yet to turn around and signal capitulation, " Jain said.
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