Foreign investors pull out $13.7 billion from capital market so far in FY19, says CARE report

 

"FPI outflows have been one of the factors attributed to the depreciation in the rupee in recent times. The depreciation in the rupee has been both a cause and effect of foreign fund outflows,” the report added.

Barring July and August, the FPIs have been net sellers in both the debt and equity markets in all the months of the current financial year.

The net outflows from the debt markets have been higher at $7.7 billion compared with the $ 6 billion outflows from the equity markets so far in the current fiscal.

 

The FPI sentiments towards India weakened since the start of the fiscal year and both global and domestic factors contributed to the shift in foreign investor sentiments towards India. However, external factors have been the more important drivers of capital flows into India.

The report also highlighted that the net FPI outflows since August were $4.9 billion, when the rupee depreciated around 7 percent during this period. But, India witnessed higher net outflows of $ 9.1 billion during April-June, when the rupee depreciated by only 3 percent.

This shows that the external factors are more dominant as compared to domestic factors such as depreciation in the rupee, rising crude oil prices, widening current account deficit and concerns over fiscal deficit among another.

While US interest rate hikes, which resulted in shrinking yield differentials, tightening global liquidity conditions along with strengthening of US dollar are some of the major external factors influencing the FPI’s sentiments toward India, the report added.