FPIs Pull Out Rs 8,319 Crore In August Amid Persisting Negative Sentiment

Foreign investors pulled out a net amount of Rs 8,319 crore from capital markets in the first half of August, continuing their selling spree in the Indian market amid uncertainty over FPI tax and global trade worries.

According to depository data, foreign portfolio investors sold equities worth Rs 10,416.25 crore during Aug. 1-16.

FPIs, however, invested a net Rs 2,096.38 crore in debt securities during the period.

So far in August, FPIs have been net sellers for nine out of 10 trading sessions, indicating “extreme negative sentiment”, Himanshu Srivastava, senior analyst manager research at Morningstar, said.

In July, FPIs had withdrawn a net sum of Rs 2,985.88 crore from the Indian capital markets (both equity and debt).

“Prevailing uncertainty over the higher tax on FPI has negatively impacted foreign investors,” Srivastava said. “They have been exiting Indian equities ever since the higher surcharge, or ‘super rich’, tax was introduced in the budget.”

A mix of unfavourable domestic and global factors have also contributed to this exodus of foreign funds from Indian equity markets in July and August. While there has been a marked slowdown in India’s economic activity, a sub-par monsoon and weak earning season have made matters worse.

The ongoing tensions between the U.S. and Iran and trade war between the U.S. and China, according to analysts, have also impacted investor sentiment.