FPI outflows hit 18-month high

Foreign investors pulled out Rs. 29,714 crore from the capital markets in May, making it the biggest outflow in 18 months, primarily due to a surge in global crude prices.

This comes following an outflow of Rs. 15,561 crore from the capital markets (equity and debt) in April. Prior to that, foreign investors had pumped in Rs. 2,662 crore in March.

According to the latest depository data, foreign portfolio investors (FPIs) withdrew a net sum of Rs. 10,060 crore from equities and Rs. 19,654 crore from the debt market in May, taking the total to Rs. 29,714 crore.

This is the steepest outflow from the capital markets since November 2016, when FPIs had pulled out Rs. 39,396 crore.

Harsh Jain, chief operating officer at Groww, an investment platform, attributed the outflow mainly to rise in cost of crude oil prices. This would impact all the oil importing economies, including India, and adversely affect its current account deficit, fiscal deficit, imported inflation and create headwinds for economic growth.

Besides, investors were cautious about U.S. President Donald Trump’s meeting with North Korean leader Kim Jong Un. The U.S. has also threatened to impose tariffs on auto imports.

Profit booking

Also, FPIs had begun profit booking before the Karnataka polls, a crucial indicator for the 2019 elections.

“Another discomfort among the FPI (Category III) was SEBI’s requirement for additional documents from the key people in such a fund. Their concern is around the privacy and data theft,” Mr. Jain noted.

So far this year, FPIs have pulled out more than Rs. 2,100 crore from equities and more than Rs. 30,000 crore from the debt market.

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