For the first time in the history of the Indian capital markets, foreign portfolio investors (FPIs) have sold securities worth over ₹1 lakh crore in a single month.
As per data from the National Securities Depository Limited (NSDL), the cumulative net outflow from the debt and equity segments was pegged at ₹1.18 lakh crore in March — more than double the previous high of ₹44,000 crore witnessed in June 2013.
Further, both the equity and debt segments have individually registered new highs in terms of monthly outflows of ₹61,973 crore and ₹60,376 crore, respectively.
COVID-19 concerns
According to market participants, the ongoing COVID-19 pandemic that has affected stocks worldwide is the primary reason for such record outflows as foreign investors shy away from riskier assets and also, emerging markets.
The global death toll of the pandemic had crossed the 50,000-mark with more than 10 lakh confirmed cases. In India, the last few days have seen a greater rise in the number of new cases thereby adding to investor concerns.
Incidentally, the impact of the record sales by overseas investors has been clearly visible in the stock markets with the benchmark Sensex registering its worst monthly fall in over 11 years. In March, the 30-share barometer lost a little over 23% (23.05% to be precise) which was the highest since October 2008 when it plunged 23.89%.
Currently, the Sensex, which closed at 27,590.95 on Friday after falling 674.36 points, or 2.39%, is trading over 53% lower than its intraday record high of 42,273.87 touched in January.
Interestingly, buying by domestic institutional investors (DIIs), which include banks, insurance companies, mutual funds and domestic financial institutions, has been acting as a strong counter force to the selling by foreign investors.
As per BSE data, March also saw the highest-ever monthly net purchases by DIIs who bought equities worth ₹55,595.18 crore. This was again double that of the previous high of ₹26,033.9 crore registered in October 2018.
In the current calendar year, while FPIs have sold equities worth ₹51,832 crore — they were net buyers in January and February — DIIs have bought shares worth ₹74,554 crore.
Meanwhile, the voluntary retention route, or VRR, in debt securities, which was opened up for FPI investments in January, has seen an inflow of ₹4,165 crore in March while hybrid securities saw a marginal outflow of ₹19 crore, according to NSDL data.
