Mumbai, April 9: Foreign portfolio investors (FPIs) have been net sellers to the tune of Rs 1.10 lakh crore in the Indian markets during the month of March as the COVID-19 pandemic dented investor sentiment worldwide. This is the highest withdrawal in a month by the foreign players tilldate.
According to latest data provided by the depositories, FPIs pulled out a net Rs 61,973 crore from equities and Rs 56,211 crore from the bond market in March, taking the cumulative net outflow to Rs 1,18,184 crore.
The outflow of funds in March comes after six consecutive months of net investment by FPIs since September 2019.
This is also the highest withdrawal ever since the FPI data has been made available by the National Securities Depository Ltd (NSDL).
Besides, in just two trading sessions of April, FPIs have withdrawn a net sum of Rs 6,735 crore from the domestic markets. Out of this, Rs 3,802 crore were pulled out from equities and Rs 2,933 crore from the debt segment.
There is a pattern in FPIs investing in markets other than their origin and emerging markets in particular. They assign particular weight, which is decided internally. If a country falls below the assigned weight, they press the “sell” button. Also, they (FPIs) sell in the form of Algo trades, where machine decides what to sell, when to sell and how much to sell. There is no human intervention, explained a market strategist.
Indian market is not the exception but the pull-out has been across the emerging markets as the impact of COVID-19 and the health issues it raised was unparalleled. Once the normalcy returns in the global financial markets, the flows from foreign players will resume. However, the quantum of flow will depend upon how adequately the respective governments have taken measures to fight the slow down, he added.
Indian government (Ministry of Finance, MoF) and the Reserve bank of India (RBI) have separately announced two different COVID-19 relief packages to fight after effects of the pandemic. Some more expected. Sebi has also ensured that capital markets remain robust and there is no problem of clearing and settlement of trades.
RBI recently raised the limit FPIs can invest in corporate bonds to 15 per cent on March 30. While this is encouraging, it is unlikely to drive investments immediately. The government's plan for easing out the lockdown after 15th April and other boosts like economic aid is crucial at this point in time.