Markets lose Rs 475 crore of foreign investment in pre-Budget week

Reversing their five-month buying streak, foreign investors withdrew a net sum of Rs 475 crore from the Indian capital markets in the first week of July amid global trade tensions and pre-Budget anticipation.

Prior to this, foreign portfolio investors (FPIs) were net buyers for five consecutive months.

FPIs invested a net Rs 10,384.54 crore in June, Rs 9,031.15 crore in May, Rs 16,093 crore in April, Rs 45,981 crore in March and Rs 11,182 crore in February into the Indian capital markets (both equity and debt).

As per latest depositories data, FPIs withdrew a net amount of Rs 3,710.21 crore from equities but invested Rs 3,234.65 crore in the debt segment during July 1- 5, resulting in a net outflow of Rs 475.56 crore.

"FPIs took out a substantial amount of money from Indian equities this week. It seems the global trends related to US-China and US-Iran are still impacting sentiments. A pre-Budget anticipation might also have had a role to play," Groww COO Harsh Jain said.

The debt segment looks bright as investors pumped in money on nearly all days of the period under review, he noted.

Himanshu Srivastava, Senior Analyst Manager Research, Morningstar said, "Cautiousness prevailed this week among foreign investors ahead of the crucial Union Budget, which was announced on July 5, 2019. Expectations and uncertainty at the same time among foreign investors prevailed over the outcome of Budget and government's roadmap towards economic growth and fiscal consolidation. Thus, FPIs adopted a cautious stance and turned net sellers."

On July 5, Finance Minister Nirmala Sitharaman presented her maiden Budget which proposed increasing minimum public shareholding from 25 per cent to 35 per cent, easing of KYC norms for foreign portfolio investors and allowing the listing of social enterprises and voluntary organisations to enhance participation in the capital markets.

Additionally, she said investments by FPIs in debt securities would be allowed to be transferred and sold to domestic investors in a timely manner and also proposed FPI investment in debt securities issued by Non-Banking Financial Companies (NBFCs).

Other proposals included merging of NRI portfolio route with the FPI route for seamless investment in stock markets and giving relief in levy of Securities Transaction Tax (STT) by restricting it only to the difference between settlement and strike price in case of exercise of options.