FPIs pull out USD 5 bn from Indian market

Foreign investors have pulled out a massive Rs 35,600 crore (about USD 5 billion) from the Indian capital markets this month on concerns over rupee depreciation, global trade war tiff and rising crude prices.

The latest outflow is higher than Rs 21,000 crore net withdrawals seen in entire September. Prior to that, overseas investors had invested a net sum of Rs 7,400 crore in the capital markets (both equity and debt) in July-August.

According to the latest depository data, foreign portfolio investors (FPIs) sold equities to the tune of Rs 24,186 crore during October 1-26 and bonds worth Rs 11,407crore, taking the total to Rs 35,593 crore (USD 4.8 billion).

FPIs have been net sellers almost throughout this year barring a couple of months such as January, March, July and August. In these four months, overseas investors have put funds totalling over Rs 32,000 crore. However, experts believe in withdrawal of funds in October has shaken the market.

So far this year, FPIs have pulled out a total of Rs 97,000 crore from the capital markets. This includes over Rs 37,000 crore from equities and close to Rs 60,000 crore from the debt markets.

According to Rahul Mishra, AVP (Derivatives), Emkay Global Financial Services, macro issues like liquidity crunch created post IL&FS default, Indian currency move and volatility in crude oil price have kept the investors at bay.

"The continued selling pressure from FPI needs to be looked from the angle of what is happening globally. From the Indian context, the current issues faced by the NBFC (non banking finance company) is not helping either," R Sreesankar Co-head equities at Prabhudas Lilladher.

Going ahead, market experts said volatility is likely to continue for other reasons too such as US sanctions on Iran, which take effect next month, as Iran is a major source of crude oil for India. Besides, India has some key state elections coming up, which could provide cues to FPIs for next year's central elections.