Amid falling rupee, trade war, FPIs have pulled out Rs 356 bn in Oct so far

The latest outflow is higher than Rs 210 bn worth of net withdrawals seen in entire September

Foreign investors have pulled out a massive Rs 356 billion (about $5 billion) from the Indian capital markets this month on concerns over rupee depreciation, global trade war tiff and rising crude prices.

The latest outflow is higher than Rs 210 billion worth of net withdrawals seen in entire September. Prior to that, overseas investors had invested a net sum of Rs 74 billion in the capital markets (both equity and debt) in July-August.

According to the latest depository data, foreign portfolio investors (FPIs) sold equities to the tune of Rs 241.86 billion during October 1-26 and bonds worth Rs 114.07 billion, taking the total to Rs 355.93 billion ($4.8 billion).

FPIs have been net sellers almost throughout this year barring a couple of months such as January, March, July and August. In these four months, overseas investors have put funds totalling over Rs 320 billion. However, experts believe in withdrawal of funds in October has shaken the market.

So far this year, FPIs have pulled out a total of Rs 970 billion from the capital markets. This includes over Rs 370 billion from equities and close to Rs 600 billion from the debt markets.

According to Rahul Mishra, AVP (Derivatives), Emkay Global Financial Services, macro issues like liquidity crunch created post IL&FS default, Indian currency move and volatility in crude oil price have kept the investors at bay.

"The continued selling pressure from FPI is needed to be looked from the angle of what is happening globally. From the Indian context, the current issues faced by the NBFC (non-banking finance company) is not helping either," R Sreesankar Co-head equities at Prabhudas Lilladher.

Going ahead, market experts said volatility is likely to continue for other reasons too such as US sanctions on Iran, which take effect next month, as Iran is a major source of crude oil for India. Besides, India has some key state elections coming up, which could provide cues to FPIs for next year's central elections.