FPIs pull out Rs 156 bn from Indian mkt on crude prices, US-China trade war

Foreign investors have pulled out more than Rs 155 billion (Rs 15,500 crore) from the Indian capital markets so far this month due to a weak rupee, surge in global crude prices and uncertainty over US-China trade relations.

This comes following an inflow of Rs 116.5 billion (Rs 11,654 crore) in equities last month and an outflow of over Rs 9,000 crore from the debt markets.

Prior to that, foreign portfolio investors (FPIs) had pulled out over Rs 11,674 crore from the country's capital markets (equity and debt) in February.

According to the latest depository data, FPIs withdrew a net sum of Rs 55.5 billion (Rs 5,552 crore) from equities and another Rs 100 billion (Rs 10,036) crore from the debt markets during April 2-27, taking the total to Rs 156 billion (Rs 15,588 crore) or $2.4 billion.

Market experts believe that weak rupee, uncertainty over global crude prices as well as US-China trade relations have affected sentiment among foreign investors.

"There is considerable volatility in global markets on account of the ongoing trade negotiations and firming up of bond yields. Domestic political developments, high valuations and application of long-term capital gains tax on equities have further dampened sentiment in India," said Ashish Shanker, head investment advisory at Motilal Oswal Private Wealth Management.

"This has led to FPIs withdrawing from equities in India. However, this is too short a time to arrive at a conclusion around this. One will have to wait and watch as to whether this trend sustains," he added.

Ajay Bodke, CEO and chief portfolio manager - PMS, at Prabhudas Lilladher, said the Indian equity market is in wait and watch mode as the fourth quarter earnings season starts and turbulence in global equities leads to a cautionary stance on emerging markets (India being no exception) on the part of FPI investor.

"However, strong revival in corporate earnings in 2018-19, strengthening industrial growth as evidenced in latest IIP numbers, benign CPI print and acceleration in aggregate demand after overcoming the twin headwinds of demonetisation and roll out of GST will limit any downside for Indian equities and lead to medium-term outperformance vis-a-vis other emerging markets," he added.

So far this year, FPIs have put in Rs 8,460 crore in equities and withdrew Rs 10,810 crore from the debt markets.