Notwithstanding the economic reforms push and positive investment climate being created by the Centre, the return on equity (RoE) on investment in India has almost halved to 12.3 per cent now from a high of 23 per cent in 2005 and is on par with China’s 12.2 per cent, which is facing a severe economic crisis.

Interestingly, the fall in RoE is not restricted to materials (mining and metals) and energy sectors, but is widespread, including healthcare, consumer cyclical, technology, banks and services.

While the ROE on materials has slid to 4.9 per cent in March from 11 per cent in January 2014, that on healthcare was down to 19.6 per cent from a high of 24.7 per cent in 2014. Similarly, saddled with huge non-performing assets, private sector banks’ returns dipped to 15.7 per cent from a high of 20.5 per cent in 2014, according to a Credit Suisse report.

Industrials worst hit Hit by the slowing economy, the industrial sector seems to be the worst affected with returns falling to 5.7 per cent in March from a high of 37 per cent in 2007 and 10 per cent two years back.

In last three months, the MSCI India is down 4.6 per cent, underperforming the MXASJ (MSCI for Asia excluding Japan) by nearly 4 per cent. India is already the third worst performing market so far this year.

Given the uncertainty, no wonder foreign institutional investors have changed their investment pattern in India and turned net sellers on eight occasions in the fiscal upto March 31.

In 2016, (up to March 30), FIIs have been net sellers to the tune of ₹14,529 crore ($2.06 billion) in equities.

During the first 11 months of this fiscal, FIIs sold equities worth ₹35,314.49 crore. However, the Centre’s willingness to adhere to fiscal disciple in the Budget resulted in a relief rally with foreign investors buying aggressively in equities. Post-Budget, FIIs pumped in ₹19,621 crore sending the bellwether Sensex up 10.15 per cent. Besides, the depreciating rupee also hit the RoE. Rupee has weakened by 6.10 per cent to 66.41 this fiscal.

Redemption pressure

Vikram Dhawan, an independent analyst, said foreign investors had to pull out from emerging markets, such as India, due to redemptions by commodity-related investment funds.

Going ahead, he said, the inflows could depend on the signals emerging from the US on its interest rate hike and the Centre’s ability to deliver on the promised reforms.