FPI net equity outflows at Rs 3,000 cr in September first week

Net outflow by FPIs follows a withdrawal of Rs 12,770 cr from stock market in Aug

Continuing the selling spree, foreign investors have pulled out close to Rs 3,000 crore from equities in the first week of this month amid "lacklustre earnings season" as well as tensions between the US and North Korea over the latter's nuclear programme.

The net outflow by Foreign Portfolio Investors (FPIs) follows a withdrawal of Rs 12,770 crore from the stock market in August. Prior to that, they had pumped in over Rs 62,000 crore in the past six months, February-July.

According to the latest depository data, FPIs withdrew a net of Rs 2,965 crore ($462 million) from September 1-8.

However, they pumped in Rs 2,700 crore in debt markets during this period.

After taking into the account the latest outflow, the total investment by FPIs in equity markets is at Rs 45,220 crore (about $7 billion) this year.

"FPIs took profits in equities due to lacklustre earning seasons. Valuations of Indian equities were already expensive coming into the second quarter of the fiscal," Bajaj Capital Senior V-P and Head Investment Analytics Alok Agarwala said.

Besides, investors were worried about fast-changing developments involving North Korea.

Pyongyang last week claimed that it had successfully tested a hydrogen bomb — by far its most powerful test — that can be loaded on to an intercontinental ballistic missile, sparking global alarm.

"Lack of consensus among the US, Russia and China on how to pressure (North Korea) to abandon nuclear ambitions made investors skittish and wary of risky assets," said Karthikraj Lakshmanan, Senior Fund Manager - Equities, BNP Paribas MF.

However, the debt markets retained its allure among FPIs, aided by weak inflation and high real rates.

"A strengthening currency, political stability and high yields in the corporate bond markets added to the attraction. Going ahead, we believe that with FPIs exhausting 99 per cent of their limit in the corporate bond space, flows in debt shall decelerate, unless fresh limits are opened up," Agarwala added.