Foreign portfolio investors (FPIs) have withdrawn a net Rs 929 crore from the Indian markets so far this month amid concerns over rising Covid-19 cases, denting the economic recovery.
The country’s tally of Covid-19 cases climbed to 1,33,58,805 with a record addition of 1,52,879 fresh infections in the 24 hours to Sunday morning. The day saw India’s active cases breaching the 11-lakh mark for the first time since the outbreak of the pandemic, according to the Union health ministry data.
The death toll increased to 1,69,275 with 839 daily new fatalities, the highest since October 18, 2020. Registering a steady increase for the 32nd day in row, the active cases increased to 11,08,087 comprising 8.29 per cent of the total infections, while the recovery rate further dropped to 90.44 per cent, says the ministry.
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The worsening situation is driving away foreign funds from the Indian markets. The FPIs had invested Rs 17,304 crore in March, Rs 23,663 crore in February and Rs 14,649 crore in January.
According to the depositories data, the overseas investors pulled out Rs 740 crore from equities and Rs 189 crore from the debt segment, taking the total net withdrawal between April 1-9 to Rs 929 crore.
Rusmik Oza, Executive Vice-President and Head of Fundamental Research at Kotak Securities, says FPI outflows came on the back of a rise in Covid cases and a sharper depreciation in the Indian rupee compared to the US doallar.
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“In the monetary policy meet, there was surprise announcement of G-Sec buying of Rs 1 lakh crore by the RBI in Q1. The assurance has led to a significant depreciation in the INR, which has moved from 72.4 to 74.8,” he says.
Oza notes that other emerging markets have slowly begun getting FPI flows in a “miniscule way”. South Korea and Taiwan are leading the inflows this month.
Strong year-on-year increase in fourth quarter earnings season is expected across all sectors with high growth in automobiles, banks, metals, mining and oil and gas industries, says Oza.
The likely strong earnings growth could restrict any major downside in the market going ahead. It is going to be a mixed reaction from FPIs in the near term.
“FPI inflows are likely to remain muted, going forward, till clarity emerges on the impact of the second wave,” says VK Vijayakumar, chief investment strategist at Geojit Financial Services.
