Foreign investors are turning their back on Indian shares as they pulled out over Rs 11,000 crore from stocks in September due to geopolitical concerns, slowdown in corporate earnings and higher valuations.
Prior to that, they had pumped in over Rs 62,000 crore in the past six months (February to July).
According to the latest depository data, FPIs withdrew a net Rs 11,392 crore ($1.75 billion) in September. However, they pumped in Rs 4,430 crore in debt markets during this period.
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After taking into account the latest outflow, the total investment by foreigners in equity markets stood at Rs 34,350 crore (about $5.2 billion) so far this year.
Slowing growth in corporate earnings coupled with high valuations and strength in the U.S. dollar leading to weakness in the rupee might have led to selling by FPIs.Alok Aggarwala, Vice President And Head-Investment Analytics, Bajaj Capital
Besides, India's GDP growth slowed to 5.7 percent in the first quarter of 2017-18 amid concerns over disruption in business activity due to issues in GST implementation. Corporate earnings registered a negative growth in the same quarter, pushing back recovery and heightening concerns on expensive valuation.
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Dinesh Rohira, CEO at 5nance.com, said, “FPIs have been been looking to rebalance their portfolios in search of better returns, hence shifting their money from the over-valued Indian stocks to some of the other under-valued emerging markets like Hong Kong.” The other reasons are geopolitical risks and not-so-good second quarter earnings expectations have led FPIs to recalibrate asset allocation from equities to Indian debt to weather the rough phase in the economy, he added.
BNP Paribas Mutual Fund Chief Investment Officer Ritesh Jain said FPIs are overweight on Indian stocks and are, therefore, looking at other emerging markets like China.
However, they have been pouring money into the debt market in search of better yields and falling interest rate expectations on the back of high inflation and reduced rates, Rohira said.
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