FPIs pull out $2.1 bn in Sep so far due to fall in rupee, widening CAD

Overseas investors have pulled out a massive Rs 153.65 billion ($2.1 billion) from the capital markets so far in September, after putting in funds during the previous two months, on widening current account deficit coupled with global trade tensions.

The latest outflow comes following a net infusion of close to Rs 52 billion in the capital markets, both equity and debt, last month and Rs 23 billion in July.

Prior to that, overseas investors had pulled out over Rs 610 billion during April-June.

According to the latest depository data, foreign portfolio investors (FPIs) withdrew a net sum of Rs 68.32 billion from equities during September 3-21 and Rs 85.33 billion from the debt market, taking the total to Rs 153.65 billion (USD 2.1 billion).

Himanshu Srivastava, Senior Research Analyst at Morningstar, attributed the outflow to widening current account deficit due to a surge in oil prices, depreciating rupee, concerns over the government's ability to meet fiscal deficit targets and lower-than-expected GST collection.
 

"All these factors deteriorated the country's macro environment. It has also cast a doubt on the sustainability of the economic growth which is closely watched by the FPIs. This coupled with expensive valuation triggered a sell-off from FPIs in September," he noted.

Additionally, given the global trade tensions, there has also been risk-aversion among foreign investors which explains their cautious stance towards emerging markets like India, which are considered to be riskier than their developed counterparts, he added.

So far this year, FPIs have pulled out over Rs 92 billion from equities and Rs 465.10 billion from the debt markets.