Foreign fund outflow hits Rs 1 lakh crore

The foreign fund net outflow for the calendar year 2018 has touched Rs 1 lakh crore. Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs) withdrew a whopping Rs 38,906 crore in October — a two-year high.

The FIIs and FPIs withdrew Rs 28,921 crore and Rs 9,978 crore from the debt and equity markets respectively, on back of falling rupee, the interest rate differential with US and higher returns in US stock markets. The last time the country witnessed such an outflow of foreign funds was in November 2016 when the FIIs and FPIs withdrew Rs 39,396 crore, owing to demonetisation.

The net outflow is the difference between net investments and net sales by foreign investors from the debt and equity markets. For the calendar year, foreign investors withdrew Rs 1,00,002 crore from Indian markets — Rs 58,294 crore from debt markets and Rs 41,598 crore from equities.

The FPIs have been net sellers almost throughout this year barring some months such as January, March, July and August. In these four months, overseas investors put in funds totalling over Rs 32,000 crore, the data by the National Securities Depository Limited (NSDL) showed.

Selling by foreign investors intensified towards the end of September, when they pulled out over Rs 21,000 crore and has continued unabated since then. But the tempers calmed in the first two trading sessions of November, as the country has Rs 401 crore of FII and FPI outflow. The latest pullout was also triggered by the upcoming elections and related uncertainty. Continued strength in dollar and spike in US treasury yields have been causing withdrawal from bond markets. If the interest rate differential with US continues to shrink, the withdrawal by FPIs may increase further, according to economists.

Foreign portfolio investments are more connected with global cues, and domestic policy intervention has little to do with that.