FPIs withdraw Rs 6,399 cr in May so far on trade war, election uncertainty

Investors have adopted a strategy of 'wait and watch' as the Lok Sabha Elections are underway

Overseas investors have pulled out a net amount of Rs 6,399 crore from the Indian capital markets in May so far on the back of election-related uncertainty and the US-China trade tensions.

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

They had infused a net Rs 16,093 crore in April, Rs 45,981 crore in March and Rs 11,182 crore in February in the domestic capital markets (both equity and debt).

However, a reversal of the trend has been witnessed in May.

As per latest depositories data, FPIs pulled out a net sum of Rs 4,786.38 crore from equities and Rs 1,612.62 crore from the debt market during May 2-17, taking the total net outflow to Rs 6,399 crore.

The broader economic growth has slowed down while uncertainty over the general election results has prompted the foreign investors to adopt a "wait and watch" stance, experts said.

"This change in trend is not entirely unexpected. It can be attributed to both domestic as well as global scenario turning unfavourable. The fallout of the US-China trade talk has waned investors' risk appetite globally," said Himanshu Srivastava, Senior Research Analyst, Morningstar Investment Adviser India.

Additionally, slowing global economy and declining liquidity adversely impacted the flows into the Indian equity markets and the broader economy also does not augur well for India, he said.