Foreign investors have pulled out close to Rs 6,000 crore so far from the Indian stock markets in January and experts believe this trend will continue in the coming months as well.
This comes following a collective net inflow of Rs 8,584 crore in the equity markets by Foreign Portfolio Investors (FPIs) during November and December 2017. Prior to that, they had pulled out a massive Rs 28,900 crore in October.
According to data available with the depositories, FPIs withdrew a net amount of Rs 5,880 crore during January 1-25.
However, they invested a net Rs 163 crore in the country's debt markets during the period under review.
"Investors are taking a cautious approach given their focus on global headwinds and upcoming general election," said Vinod Nair, Head of Research, Geojit Financial Services Ltd.
It has not been a good start of the year with regards to FPI flows and clearly, they are continuing with their cautious or wait and watch stance towards India, which they have been maintaining for a long time, said Himanshu Srivastava, Senior Analyst Manager Research at Morningstar Investment Adviser India.
He further said that the focus would continue to be on the upcoming Union Budget, progress on the economic front and the general election.
Other factors such as movement in crude prices and currency, which would have a bearing on the country's macro-environment, and worries over global trade war will continue to guide the direction of FPI flows, Srivastava added.
"In addition, the concerns surrounding the global growth outlook as well as the stance of US Fed towards interest rates will also play a significant role in deciding the direction of foreign flows," he noted.
Echoing similar views, Alok Agarwala – Senior VP and Head Investment Analytics at Bajaj Capital, said FPI flows would continue to be volatile in the coming months.
"The outflows could continue further with US interest rate hikes, tightening global liquidity condition and escalating trade disputes. The domestic macroeconomic concerns viz, weakness in currency, movement of crude oil prices, trade deficit would also weigh in on inflows," he said.
"As a base case scenario, we could expect overall net flows to turn marginally positive in case external conditions improve in the next few months as one of the factors -- oil prices corrected sharply in last few months," he added.