Foreign Investors Pull Out Over Rs 6,200 Crore In October So Far

Foreign portfolio investors withdrew over Rs 6,200 crore from Indian capital markets in the first two weeks of October, as global recession fears and trade war concerns weighed on sentiments.

Foreign investors pulled out a net amount of Rs 4,955.2 crore from equities and Rs 1,261.9 from the debt segment, taking the total net withdrawal to Rs 6,217.1 crore during Oct. 1-11, as per latest depositories data.

Overseas investors were net buyers in the preceding month and had infused a net sum of Rs 6,557.8 crore in the domestic capital markets (both equities and debt), according to the data.

FPIs in October went back in “hibernation mode” after remaining net sellers in September when the inflows were driven by a slew of economic reforms announced by the government, said Himanshu Srivastava, senior analyst manager - research at Morningstar Investment.

“However, things have remained muted after that, as FPIs have turned risk-averse with fears of global recession and trade war gaining momentum. Moreover, the Indian economy has also been facing significant headwinds and has failed to pick pace so far. More recently, world bodies like the International Monetary Fund, the Asian Development Bank and Moody's have cut growth forecasts of India, which dented sentiments further,” Srivastava said.

Harsh Jain, co-founder and chief operating officer at Groww, said, “the new FPI/foreign direct investment classification might affect the mood of foreign investors for some time. The reduced gross domestic product forecast by Moody’s and other institutions seems to be affecting the foreign investors also. India’s troubled banking and financial sector is definitely making investors jittery.”

Arun Mantri, technical and derivative analyst at Karvy Stock Broking, said FPIs have been net sellers so far in October “tracking global headwinds”.

“This has occurred despite the government’s major announcements to revive animal spirits. The major reason behind the selling is the rising fear is a global recession, and weak investor sentiment due to the ongoing trade war between U.S. and China,” he added.

For the future course of FPI flows, he said, in the short to medium term, FPIs flows will depend on corporate earnings, global trade developments and government actions to curb the slowdown in the economy.