Fearful FPIs March Out of Indian Markets

With global trading desks in a ‘sell-everything’ mood, foreign portfolio investors pulled a record $15.9 billion (₹1.2 lakh crore) out of the Indian debt and equity markets in March, according to NSDL data. The Covid-19 outbreak has wreaked havoc on markets across the world, with investors fleeing to whatever haven they can find, exceeding exits from India during the financial crisis. For the year, FPIs have pulled out a record $15.11 billion (₹1.12 lakh crore) from India, the most in Asia, barring South Korea.

The combined impact of market value erosion and redemption pressure on fund houses compressed total Indian equity assets under management by FPIs to $341 billion (₹25.52 lakh crore) on March 15, compared with $431 billion (₹33 lakh crore) at the beginning of 2020, a decline of 20%.

FPIs account for a fifth of the total market capitalisation of Indian equities. In the first fortnight of March, the selling of FPIs in financial services, banks and oil & gas counters accounted for nearly 90% of the total outflow. FPIs have sold equities worth $9.5 billion (₹71,000 crore) in the past 22 days. On a rolling basis, FPI selling in the past 22 trading days was 0.7% of India’s market capitalisation, the most in the history, according to Nomura.

Total March sales exceeded total FPI exits in all of 2008, the year of the global financial crisis. Fund flows from the debt and equity markets amounted to $9.33 billion (₹69,800 crore) in 2008. The ratio of purchases to sales of FPIs in the equity segment was 0.74 in March 2020 compared with 0.76 in September 2008. FPIs sold equities worth a record ₹2.2 lakh crore in March 2020.

On debt side, the gross buying to sales ratio was 0.27, the lowest since April 2008.

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