FPIs Exit Causes Markets To Fall Below $2 Trillion

The Indian stock market, which was the 7th largest in the world in December last year slipped to 9th position after Foreign Portfolio Investors (FPI) pulled out equities worth Rs 15, 000 crore since the Budget 2019. This happened due to concerns being raised regarding the increase in surcharge on super-rich tax, which is going to affect around 40% of FPIs, who follow the trust structure. 

As the purposed hike in surcharge is going to be applicable on individual, association of persons and trusts. Thus 40% FPIs following the trust structure will also be affected due to this announcement. 

Indian stock market first entered into the club of $2 trillion cap club of 8 countries in May 2017. After going down briefly in February, stock market picked up and reached an all time high of $2.24 trillion on June 4. There were hopes that the budget presented by Bhartiya Janta Party-led government with a strong majority in Parliament would roll out measures to revive the economy and pull out the non-banking financial companies from huge distress, that they are currently reeling under. 

In terms of market capitalisation France and Canada are standing at 6th and 7th position respectively with 15% and 19% respective gains.

Indian stock market recapitalisation fell below $ 2 trillion mark for the first time in six months, triggered by the FPI pull out.  The country’s total value of all listed stocks dropped down to $1.97 trillion on August 2, 2019, and slipped below Germany. 

The organisations that contributed the most to the erosion in market capitalisation in July are State Bank of India, Oil and Natural Gas Corporation  

(ONGC), Axis Bank, Coal India and Larsen & Toubro.

Amongst the top 15 countries, South Korea and India have lost valuation in terms of market capitalisation in 2019. On the other hand China’s market capitalisation has risen by 22% to $6.58 trillion so far this year, while that of the US has gained 19.2 % to $32.037 trillion.