Regardless of huge fund infusion by FPIs (foreign portfolio investors) since the past 2 months, the domestic financial market underwent a foreign fund outflow of approximately ₹ 44,500 crores on a disposable basis in financial 2018-19 as macroeconomic winds assessed over the sentiments of investors throughout the year.
Federal Reserve of the United States
Furthermore, Rate hikes by Federal Reserve of the United States are devaluing Indian rupee, rise in prices of crude oil. It deteriorating current account deficit, distresses over the fiscal deficit. And a target for existing account deficit along with the trade argument between the United States and China weakened the mood in developing markets, as per the experts.
Additionally, in the fiscal year 2018-19, FPIs withdrawal of a net amount of around ₹ 1,629 crores from the equities. As well as more than ₹ 42,951 crores from the bonds market, pulling out an overall net outflow to around ₹ 44,580 crores, as displayed in the depositories data.
On the other hand, FPIs had filled a net amount of approx. ₹ 25,634 crores in the equities. Also, ₹ 1,19,035 crore in the debt market. It ended up in getting an overall net investment more than ₹ 1,44,669 crore.
“After two years of good foreign fund inflows, the Indian market witnessed a reversal in the trend. We received ₹ 48,411 crores and ₹ 1,44,682 crore in the year 2016-17 and 2017-18, respectively. Global and domestic causes alike have prompted the flows of funds in 2018-19 from the markets and both the equity and debt segments have witnessed outflows”, articulated by Alok Agarwala, a Senior vice president as well as Head Investment Analytics in Bajaj Capital.
FPIs continued to be net sellers nearly throughout the lately settled fiscal year except for a preceding couple of months. Moreover, October arose as the month of the sharpest outflow with FPIs taking out a massive amount of around ₹ 38,900 crores from the Indian market.
On the other hand, additional fund infusion was seen in the last 2 consecutive months of the fiscal year. In which only the month of March valued for a net infusion of around ₹ 45,981 crores. Plus a net amount of around ₹ 33,980 crores in equities as well as approx. ₹ 12,001 crores in debt.
Furthermore, in the month of February, the foreign players pumped in a net volume of approximately ₹ 11,182 crores.
It led to an improvement in global liquidity conditions. In January 2019, the US Fed announced a pause in a rate hike, followed by China and European Central Bank. Further, providing stimulus to their respective economies,” stated Himanshu Srivastava, a Senior Analyst Manager Research in Morningstar.
All of this coupled with an expectancy of a positive outcome from the US-China trade treaty. It also boosted the risk over sentiments amongst foreign investors who diverted massive investments to the developing markets.