FPIs pull out Rs 7,344 cr from equities in Aug, flee to safe haven assets

This comes following a net inflow of over Rs 62,000 cr in last six months from February-July 2017

Foreign portfolio investors (FPI) have pulled out more than Rs 7,300 crore from the equity markets this month so far as they flee to safe haven assets amid geopolitical tensions and some domestic concerns.

However, FPIs have invested about Rs 9,364 crore in debt markets during this period.

According to the latest depository data, FPIs withdrew a net sum of Rs 7,344 crore ($1.14 billion) from stock markets during August 1-18.

This comes following a net inflow of over Rs 62,000 crore in last six months from February-July 2017. Prior to that, they withdrew close to Rs 1,200 crore.

After taking into the account latest outflow, the total investment in equity markets stood at Rs 53,610 crore ($8 billion) this year.
 

Market analysts attributed the latest outflow from equities to geopolitical tension between the US and North Korea over the latter's ballistic missile programme and a deadly attack in Spain.

"Growing geopolitical concerns injected an element of uncertainty, which prompted FPIs to hedge risks. Given emerging markets are more susceptible to such uncertainties, they restrained their investments into Indian markets," Himanshu Srivastava, senior analyst manager research at Morningstar said.

Additionally, confidence has fallen given Sebi's action over shell companies while a slowdown in business growth will lead to a downgrade in earnings forecast for the next 1-2 quarters, Geojit Financial Services Head of Research Vinod Nair said.

According to Vidya Bala, head of MF research at FundsIndia.Com said that FPI investments in debt have been robust for the last few months.

"While the run-up to the monetary policy saw some tepid flows, as investors remained cautious in the event of a no rate cut stance by RBI and the inflows picked up right after the the 25 basis points rate cut on August 2," she added.

Markets regulator Sebi, in early July, increased the FPI limit in central government securities, which provided a longer rope for them to pump in money.

"With the spread between US 10-year bond and 10-year India gilts at a good 4.2 percentage points even now, FPIs continue to seek opportunities in the Indian debt market with the rupee-dollar equation stable," she added.