Indian two thousand and five hundred rupee banknotes. (Photographer: Dhiraj Singh/Bloomberg)

FPIs Net Outflow From Equities At Rs 4,000 Crore In December So Far

Foreign investors have pulled out more than Rs 4,000 crore from the country’s stock markets this month so far, mainly due to rising crude prices and widening fiscal deficit.

The outflow comes following an eight-month high inflow of Rs 19,728 crore in November, mainly due to the government's plan to recapitalise PSU banks and surge in India's ranking in the World Bank's ease of doing business.

This was the highest net investment by FPIs since March when they had poured in Rs 30,906 crore in the equity market.

According to the depositories data, Foreign Portfolio Investors (FPIs) withdrew a net amount of Rs 4,089 crore ($634 million) from equities till Dec. 8.

However, such investors had put in over Rs 2,200 crore in the debt markets during the period under review.

"Rising crude prices and widening fiscal deficit prompted FPIs to adopt a cautious stance for now. As per the recently released data, India's fiscal deficit rose to 96.1 percent of the full-year target by the end of October. The fiscal deficit data, released on Nov. 30 overshadowed a resounding GDP growth of 6.3 percent for September quarter, released on the same day.

Besides, appreciating rupee and rising domestic markets provide a good profit booking opportunity to FPIs, especially before Christmas and new year
Himanshu Srivastava, Senior Analyst Manager (Research) At Morningstar India

It has been a tremendous journey for the Indian equity markets in the calendar year 2017. After taking a break from buying into Indian equities in August and September and returning cautiously in October, FPI’s bought Indian equities in abundance in November. However, they withdrew funds in this month so far.

Going ahead, the FPIs can be expected to continue with their cautious approach to investing in Indian equities for the remaining month given the Gujarat elections. Additionally, they would also be looking for further signs of economic growth before deciding on India allocations, Srivastava said.

Even if there are net outflows in December, we will end the year with higher net inflows from FPIs compared to the last two years, he added.

Overall, FPIs have invested over Rs 53,000 crore in equities so far in 2017 and another Rs 1.5 lakh crore in debt markets.