FPIs net inflows plunge to Rs 547 cr in June quarter

Foreign investors poured a mere Rs 547 crore in Indian capital markets during April-June quarter, after pumping in a whooping Rs 79,000 crore in the preceding three months.

The decline in inflows can be attributed to a slew of global and domestic factors including concerns about slow revival in corporate earnings, taxation issues, uncertainty over Greece's debt crisis and better returns from Asian peers.

According to data from depositories, during April-June quarter, Foreign Portfolio Investors (FPIs) invested a total of Rs 2,608 crore in equities, while they pulled out a net sum of Rs 3,155 crore from the debt markets, making the total net inflows at Rs 547 crore.

In comparison, the net inflows by FPIs in equities was at Rs 36,473 crore, while the same for the debt markets stood at Rs 42,502 translating into a total inflow of Rs 78,975 crore for the January-March quarter.

"The slowdown in FPIs' investment in the domestic capital markets during the second quarter could be attributed to slow revival in corporate earnings. Besides, FPIs have been finding China more attractive than India.

"In addition, FPIs were apprehensive that the government would impose a 20 per cent Minimum Alternate Tax (MAT) on profits earned by them," UTI Mutual Fund EVP and Fund Manager V Srivastava said.

Srivastava noted that though "in the short-term, there is no trigger for FPIs to pump in money in the domestic capital markets but in medium to long-term, India is an attractive place for investment."

Furthermore, sentiment was also hit after Greece failed to reach an agreement with its creditors.

BNP Paribas Mutual Fund Chief Investment Officer Anand Shah said: "There is nothing to worry about FPIs' flight from the Indian stock markets. In medium to long-term, India is an attractive place for investment. FPIs will start investing in our markets when issues of Greece and rate hike by the US Federal Reserve get sorted out."

Data showing acceleration in industrial production growth and easing of food price inflation and expectations that above average monsoon rain will work in favour for further monetary policy easing from Reserve Bank are expected to help FPIs to infuse money, experts pointed out.

Since January, overseas investors have invested a net amount of 79,160 crore in the capital markets (equities and debt).