FPI outflows hit $3 bn in Nov on cash crisis, US rate hike fears

FPIs invested Rs 37,146 cr in stocks while they pulled out Rs 13,278 cr from debt market, resulting in a combined net inflow of Rs 23,868 cr

Foreign investors have pulled out close to $3 billion from the Indian capital market this month so far on lingering concerns over the government's demonetisation decision and fears of a rate hike by the US Federal Reserve.

According to data, net withdrawal by FPIs from equities stood at Rs 9,841 crore during November 1-18 while the same from the debt market was Rs 9,720 crore during the period under review, translating into a total outflow of Rs 19,561 crore ($2.89 billion).

The foreign portfolio investor (FPI) outflow comes following net withdrawal of more than Rs 10,306 crore from the capital markets (equity and debt) last month. Prior to that, the equity market had witnessed an inflow of over Rs 20,000 crore.

So far this year, FPIs have invested a net sum of Rs 37,146 crore in stocks while they have pulled out Rs 13,278 crore from the debt market, resulting in a combined net inflow of Rs 23,868 crore.

Sentiment remained distinctly weak due to the cash crunch because of the government's move to withdraw Rs 500 and Rs 1,000 notes to flush out black money amid concerns about its impact on small and medium-sized businesses that largely run on cash transactions, experts said.

US Federal Reserve chief Janet Yellen reiterated that the central bank may hike interest rates "relatively soon", which made investors more anxious.

"The signals from the US Fed on December rate hike have inflicted more pain on equities, which were already reeling under demonetisation," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.