Selling by foreign institutional investors (FIIs) has crossed $2 billion since the announcement of demonetisation and Donald Trump’s surprise victory in the US presidential elections on November 8. They have been net sellers to the tune of $2.2 billion (Rs 15,200 crore) in the past 11 consecutive trading sessions.
Foreign investors have pulled out $2.1 billion from the domestic market so far this month, one of the worst monthly sell-off since August last year, when a surprise devaluation of the yuan by China had raised concerns over the health of world’s second largest economy and triggered a massive global sell-off.
This time around, money is flowing out of emerging markets, like India, due to rising bond yields in the US. The yields in the US are hardening due to rising inflation expectations on prospects of Trump’s pro-growth policies. Also, the US Federal Reserve is widely expected to raise rates at its policy meeting next month.
Other emerging markets such as Indonesia and the Philippines have seen FIIs pull out of $844 million and $450 million, respectively, so far in November. Higher interest rate in the US market limits the availability of easy money and dulls the appeal of riskier assets.