Chennai: Ever since the Union Budget was announced that had in it hints of the return of Nehruvian socialism, foreign investors are on a withdrawing spree.
Latest reports suggest foreign portfolio investors (FPIs) have withdrawn a net amount of Rs 2,881 crore from the Indian capital markets in the first two sessions of August on account of domestic as well as global headwinds.
According to latest depositories data, pulled out a net sum of Rs 2,632.58 crore from equities and Rs 248.52 crore from the debt segment during 1-2 August, taking the cumulative net outflow to Rs 2,881.10 crore.
Prior to this, FPIs withdrew a net Rs 2,985.88 crore from the Indian capital markets (both equity and debt) during 1-31 July.
FPIs were net buyers in the Indian capital markets in the first half of the year, barring January. They infused a net Rs 10,384.54 crore in June, Rs 9,031.15 crore in May, Rs 16,093 crore in April, Rs 45,981 crore in March and Rs 11,182 crore in February.
However, the trend reversed in July after the announcement of higher tax on FPIs registered as trusts and association of persons in the Union Budget for 2019-20, experts said.
The sentiments have also been impacted by slowdown in the economy, weak quarterly earnings and sub-par monsoon, among other factors, they added.
Foreign institutional investors (FIIs), who bought $9.4 billion of Indian shares so far in the year, have already sold a fifth of them by value.
In July, they sold shares worth $1.92 billion. Foreign investors started dumping Indian shares after the Union budget raised surcharge on the ultra-rich that was also applicable to some FIIs.
This can be seen as the causality of the country’s economy troubles. According to reports, eight infrastructure sectors, which constitute 40.27 per cent of the index of industrial production, were almost flat (0.2 per cent) in June.
It could pave the way for another round of policy rate cuts by the Monetary Policy Committee of the Reserve Bank of India set to convene on 7 August.
Data released by the Controller General of Accounts showed that the central government had exhausted 61.4 per cent of its full-year fiscal deficit target during the first quarter (April-June). This compares with 68.7 per cent during the same period a year ago.
| Loss and gain |
| India’s loss has been the gain of other nations with respect to FPIs. Thailand, Indonesia, South Korea and Japan, have seen July inflows ranging from $400 million to $1.7 billion.
It must be noted that after the NDA government came to power for the second consecutive time, FPIs pumped in over Rs 60,000 crore into the Indian capital markets in the March-May period. |