FPIs Pull Out Rs 900 Cr As Border Tensions Hit Market Sentiment

New Delhi, Sep 6: Overseas investors pulled out Rs 900 crore on a net basis from Indian markets in the first four trading sessions of this month as weak economic data and India-China border tensions hit market sentiment. 

Depositories data showed that Foreign Portfolio Investors (FPI) pulled out Rs 675 crore from equities and Rs 225 crore from the debt segment on a net basis between September 1-4.

Prior to this, FPIs were net buyers for three consecutive months. They invested Rs 46,532 crore in August, Rs 3,301 crore in July, and Rs 24,053 crore in June on a net basis.

"FPIs turned cautious at the start of the week ahead of the release of the GDP data. Amidst the coronavirus pandemic, India's GDP for the quarter ended June 2020 contracted by a huge 23 per cent, which dented sentiments," said Himanshu Srivastava, associate director - manager research, Morningstar India. 

They also stayed on the sidelines on the back of weak global cues and rising border tension between India and China, he added.

The net outflow during this week could also be a result of profit-booking by FPIs, in anticipation of further escalation of tension between India and China and extension of the weak domestic economic environment, he added.

Rusmik Oza, executive vice president, head of fundamental research at Kotak Securities noted that FPI flows were "quite suppressed this week." 

The rising cases of coronavirus in India which has crossed 4 million and the sharp sell-off in the US markets could lead to outflows by FPIs in the coming weeks, Oza added.

On the global front, while rising coronavirus cases and tension between US and China could turn investors risk-averse if the scenario demands; at the same time, the availability of surplus liquidity in the global financial system may ensure that India continues to receive its share of investments, Srivastava said.