The portrait of Mahatma Gandhi is displayed on Indian rupee banknotes in an arranged photograph in Bangkok, Thailand. (Photographer: Brent Lewin/Bloomberg)

Foreign Investors Pull Out Rs 9,300 Crore In Four Trading Sessions

Foreign investors have pulled out over Rs 9,300 crore from the Indian capital markets in the last four trading sessions on unabated fall in rupee and rise in crude oil price.

The latest withdrawal comes following a net outflow of over Rs 21,000 crore from the capital markets (both equity and debt) last month. Prior to that, they had put in a net amount of Rs 7,400 crore during July-August.

Foreign portfolio investors withdrew a net sum of Rs 7,094 crore from equities and Rs 2,261 crore from the debt market from Oct. 1-5, taking the total to Rs 9,355 crore, according to the latest depository data,

FPIs have been net sellers almost throughout this calendar year, except a couple of months. However, the swiftness of the exit in October so far has shaken the market, experts said.

“Rise in oil prices and U.S. Treasury yields and tightening of global dollar liquidity are the key reasons for the FPI selling as they have induced high volatility in currency, bond and equity markets,” they said.

Also read: All the Nightmares for Stock Investors Start in the Bond Market

One must, however, remember that this is a global phenomena across emerging markets and not limited to India alone. Of course, the impact of a rise in oil prices is higher for India as it imports most of its oil requirements. The matter was further exacerbated by the IL&FS (Infrastructure Leasing & Financial Services Ltd.) default and the rout in NBFC (non-banking financial company) debt papers
Alok Agarwala, Senior Vice-President and Head Investment Analytics, Bajaj Capital

Making a similar point, Vidya Bala, head of mutual fund research at FundsIndia, said rising rates in the U.S., strengthening dollar and higher U.S. earnings have been triggers for money moving out of India and other emerging markets to the U.S.

While these have been the primary factors for the pullout, locally, rising oil price and oil marketing companies absorbing price cuts, the recent spate of management-related issues in banks and tightening liquidity in NBFCs have been immediate triggers.
Vidya Bala, Head of Mutual Fund Research, FundsIndia

The volatility, she said, can be expected to continue for other reasons too, like U.S. sanctions on Iran, which take effect in November. Iran is a major source of crude oil for India.

“India also has some key state elections coming up, which could provide cues to FPIs for next year’s central elections,” Bala said.

So far this year, FPIs have pulled out over Rs 20,000 crore from equities and more than Rs 50,000 crore from the debt market.

Also read: FPI Outflow Hits Four-Month High Of Rs 21,000 Crore In September