October has turned out to be the worst-ever month for Indian equities in terms of outflows from foreign portfolio investors (FPIs) that are often looked upon as the prime drivers of any bull run.
Data shows that FPIs have been net sellers at nearly $4 billion or ₹28,921 crore in October, which is significantly higher than any single month net sales registered in the last 16 years since data is available.
Incidentally, the previous high was seen in November 2016, when FPIs sold Indian shares worth ₹18,244 crore. Meanwhile, in the current calendar year, foreign investors are net sellers at ₹42,138 crore or nearly $5.78 billion.
As expected, the huge quantum of selling by foreign investors has affected the stock markets with the benchmark Sensex shedding nearly 5% or 1,785 points in October. The fall can be further gauged from the fact that the 30-share barometer has lost nearly 12% when compared to the high of 38,989.65 touched in the month of August.
While market participants attribute the FPI selling to the overall aversion towards emerging markets coupled with factors such as the record fall in the rupee against the dollar and the surge in global oil prices that adversely impacts India’s current account deficit, they believe that the worst is over and flows should stabilise in the near-term.
“Things may stabilise in the near-term as oil prices have fallen and the dollar is not expected to strengthen dramatically from current levels,” said U.R. Bhat, managing director, Dalton Capital Advisors India.
“Corporate earnings have also been good and the recent correction has made the valuations attractive as well. The only worry now is the ongoing trade war tensions and any escalation on that front could adversely affect flows,” added Mr. Bhat.
In a recent interaction with The Hindu , globally-renowned emerging markets fund manager Mark Mobius had said that outflows could probably see a slowdown “because the situation globally is that money is now coming back into emerging market funds.”
Indices gain
Meanwhile, the Sensex on Wednesday gained 550.92 points or 1.63% to close at 34,442.05 as banking and financial stocks led the rally after the government tried to assuage concerns of a spat with the RBI.
HDFC, IndusInk Bank, Axis Bank, Yes Bank, SBI, ICICI Bank were among the top gainers of the day.
The Nifty settled the day at 10,386.60, up 188.20 points or 1.85% higher.
