Coronavirus crisis: FPIs withdraw Rs 12,650 cr from capital market in April

Foreign portfolio investors (FPIs) have withdrawn a net Rs 12,650 crore from the Indian capital markets in April so far amid the coronavirus crisis.
Between April 1 to 17, FPIs pulled out a net sum of Rs 3,808 crore from equities and Rs 8,842 crore from the debt segment, the depositories data showed.

The total net outflow stood at Rs 12,650 crore.
However, April has been a tad better compared to March, when overseas investors had withdrawn a record Rs 1.1 trillion on a net basis from the Indian markets (both equity and debt).
The quantum of net outflows has significantly slowed down, at least from equities, said Himanshu Srivastava, senior analyst manager research, Morningstar India.
"Out of eight trading days so far in the holiday truncated month, FPIs were net buyers in the Indian equity markets in four," he said.
Citing the reason for net inflows on some days in April, Harsh Jain, co-founder and COO at Groww, said "global markets are becoming more stable. The general belief is that the virus has peaked in many parts of Europe which is aiding the sentiments of global investors. The oil deal between OPEC and Russia is also contributing to the relatively more stable markets."
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According to Srivastava, the widespread concern among foreign investors about slowdown in the global economy due to the Covid-19 outbreak has been keeping them on the tenterhooks.
He added that slowdown in the quantum of net outflows in April does not indicate a change in the trend at this juncture as the underlying environment continues to be negative.
However, he said this could be a result of India gaining prominence among foreign investors for doing well with regards to containing the pandemic.
In addition to that, measures announced by the government and the RBI periodically to revitalise the sagging economy would also be resonating well with investors. The sharp fall in the markets has also provided investors an opportunity to invest at relatively attractive levels, he said.
Going forward, Srivastava cautioned that "there lies a bumpy ride ahead."
In such times of uncertainty, FPIs would continue to adopt a measured approach when it comes to investing in emerging markets like India. With low risk appetite, they would continue to drift towards safer investment avenues and safe havens such as USD and gold, he said.

Diversified global, US and Europe funds saw biggest outflow: Cameron Brandt

Foreign portfolio investors (FPIs) pulled out Rs 62,000 crore from Indian equities in March. This was the biggest monthly outflow, based on the National Securities Depository data available as far back as 2002. Cameron Brandt, director of research at EPFR Global, tells Puneet Wadhwa that sentiment towards India had started to sour before the Covid-19 pandemic began to dominate the investment climate. Edited excerpts:
How has the big money moved across geographies in the March, and especially in March 2020 quarter? What is the quantum of outflow from the developed markets and the emerging markets?

VDO.AI
Before the coronavirus-triggered sell-off in late February, flows were coming into bond funds, particularly US ones, at a record-setting pace. Flows to equity funds were more subdued, but funds with global mandates were attracting plenty of fresh money —including above average amounts of retail cash. Among the emerging market (EM) fund groups, China and Brazil equity funds recorded above-average inflows. In March, we saw a broad rush. This, I think, was because liquidating those assets tended to come with smaller losses.
Below is a table showing the preliminary monthly figures for the three main groups, and where those numbers rank historically.
Equity, bond, money market flowsEquity, bond, money market flows
Are we done with the exchange-traded fund (ETF) selling, especially in the Indian context, or can there be more pain in the coming months?
I don’t think so. Sentiment towards India was souring before the Covid-19 pandemic began to dominate the investment climate. Capex trends, the government’s focus on nationalist rather than economic goals, inflation, and the health of India’s banking system were all giving investors pause for thought.
Could India attract incremental foreign flows over the next few months?
Fund groups dedicated to EMs, which are viewed as being on top — or on the right track to get on top of — the pandemic, are attracting inflows. India, as mentioned earlier, has issues that were crimping flows before the latest crisis.
Which regions/geographies saw the maximum pullout and where (regions and asset classes) did this money get deployed?
In cash terms, funds with diversified global, US, and European mandates saw the biggest outflow.
What money that rotated rather than exited to money market funds has gone to several country fund groups, such as the United Kingdom, China, Switzerland, Japan, Brazil, and Taiwan equity funds and Germany bond funds.
What’s your view on how the markets have reacted to the Covid-19 pandemic? Is worst over? Has a ‘selling fatigue’ now set in?
A range of strategies have been deployed with varying degrees of success, and credible sources of information have emerged. But there is still enough uncertainty. Many questions remain unanswered -- such as will there be a second peak, what is the ability of virus to mutate, etc – to make it a little early to rule out another sharp sell-off.
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How long do you think it will take for the global markets and the economy to return to pre-Covid-19 levels? How severely has the health crisis dented the confidence of investors?
I think the equity markets will recover faster than the bond markets. A lot of the support measures from central banks and governments complicate the issuance and yield equations for bonds, while the response of individual businesses to the Covid-19 pandemic gives equity investors a clear metric to judge individual stocks.
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Are the central bank measures adequate to address the problem at hand? What’s your view on how the global central banks have responded and what more do you expect over the next few months?
It is too early to forecast this. If things start to ‘normalise’ by early May, I suspect the global economy will muddle through. If large chunks of the global workforce and consumer base is still locked down in June, the problems will be much harder to solve. Most central banks are low on ammunition.
What is the road ahead for the debt segment because of the health crisis and how the central banks and various governments have responded to it? Is it time to switch to debt?
Before the pandemic sell-off, people were pouring money into bond funds with a pre-retirement rotation playing a big role. So, the underlying demand is strong. Yield hunger is also extreme: The junk bond funds we track had record inflows last week. And there is a US Federal Reserve / European Central Bank (ECB) backstop again. But the official response involves greatly increased debt levels and issuance.

Covid-19: FPIs pull out record Rs 1.1 trn in March, highest withdrawal ever

Foreign portfolio investors (FPIs) have net withdrawn a record Rs 1.1 trillion from the Indian markets in March as the coronavirus pandemic dented investor sentiment worldwide.
According to latest depositories data, FPIs pulled out a net Rs 61,973 crore from equities and Rs 56,211 crore from the bond market in March, taking the cumulative net outflow to Rs 1,18,184 crore.
The outflow of funds in March comes after six consecutive months of investment by FPIs since September 2019.

This is also the highest withdrawal ever since the FPI data has been made available by the National Securities Depository Ltd.
Besides, in just two trading sessions of April, FPIs have withdrawn a net sum of Rs 6,735 crore from the domestic markets. Out of this, Rs 3,802 crore were pulled out from equities and Rs 2,933 crore from the debt segment.
"The sell-off in March is mostly driven by quant funds, hedge funds, and risk parity funds," Harsh Jain, co-founder and COO at Groww said.
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Terming the fund outflow as "unparalleled", Himanshu Srivastava, senior analyst manager research, Morningstar India, said that with fear over the degree of impact that Covid-19 could leave on the global economy, foreign investors stormed out of the emerging markets, with India among the worst hit.
"The intensity of the situation could be gauged from the fact that even during the financial crisis of 2008, FPIs sold net assets worth $9.3 billion in the Indian markets while in March 2020, they have been net sellers to the tune of USD 16.5 billion," he added.
Regarding the future of FPI flows, Srivastava said these are unprecedented scenarios and with risk-taking going off the table, emerging markets like India may most likely witness a prolonged period of net outflows till the time situation on the coronavirus front stabilizes.
Jain said: "RBI raised the limit FPIs can invest in corporate bonds to 15 per cent on March 30th. While this is encouraging, it is unlikely to drive investments immediately. The government's plan for easing out the lockdown after 15th April and other boosts like economic aid is crucial at this point in time.

FPIs stay bullish on India, pour in Rs 5,072 cr in October so far

Foreign portfolio investors (FPIs) have infused a net sum of Rs 5,072 crore into the Indian capital markets in October so far amid the government's efforts to revive domestic demand.
In the preceding month, FPIs had invested a net Rs 6,557.8 crore in the domestic capital markets (both equity and debt). This came following net outflows in July and August.

As per the latest depositories data, foreign investors put in a net sum of Rs 4,970 crore in equities and a net Rs 102 crore in the debt market during October 1-18, taking the cumulative net investment to Rs 5,072 crore.
Reacting to the inflow of funds in October, head of research at Samco Securities, Umesh Mehta said, "The worst seems to be behind us and markets have started to discount the forward looking Budget and revival of consumption."
"The government's efforts to revamp domestic demand by increasing DA, cutting corporate taxes, recapitalisation of PSU banks, strategic disinvestments have all contributed in changing FPIs' stance," he added.
Arun Mantri, technical and derivative analyst at Karvy Stock Broking, said that on the international front, "expectations of a US and China partial trade deal and expectations of positive outcome from negotiations have triggered a risk-on period."
Regarding the future course of FPI flows, Harsh Jain, co-founder and COO, Groww, said, "The momentum is expected to continue in the long term as India is a very attractive investment destination with sound fundamentals. The markets are extending gains in the hopes of better quarterly results. Brexit deal, if successful, will bring more confidence to the global investors' sentiments and help boost investment into India.

FPIs pull out Rs 1,263 cr in first week of Sept despite surcharge rollback

Continuing their selling spree, foreign investors withdrew a net sum of Rs 1,263 crore from the Indian capital markets in the first week of September amid global headwinds even as the government rolled back enhanced surcharge on FPIs.
As per latest depositories data, foreign portfolio investors (FPI) pulled out a net amount of Rs 4,263.79 crore from equities but infused a net Rs 3,000.86 crore into the debt segment during September 3 - 6, translating into a net outflow of Rs 1,262.93 crore. Markets were closed on September 2 for 'Ganesh Chaturthi'.

FPIs have remained net sellers for the previous two months, pulling out Rs 5,920.02 crore in August and Rs 2,985.88 crore in July from the domestic capital markets (both equity and debt).
"The US-China trade war continues to influence the global investor sentiments. Last Friday's announcement of GDP might also have caused some investors to withdraw from the equity markets," said Harsh Jain, COO at Groww.
Overseas investors pulled out more than Rs 30,000 crore from the equities during July-August after Finance Minister Nirmala Sitharaman in her maiden Budget enhanced tax surcharge on FPIs.
"The FPIs have been aggressively selling for the last two months as the enhanced surcharge announced during the Union Budget and economic slowdown weighed on the sentiments.
"Further, falling global yields has also led to outflow. Despite rollback of FPI surcharge by the government, the selling pressure continued, making it evident that the outflow was due to lack of valuation comfort in the Indian markets and citing signs of the economic slowdown," said Ajit Mishra, VP Research at Religare Broking Ltd.
Going ahead, the FPI fund flow would remain sluggish until there are meaningful signs of revival in the economy, he added.

Markets bounce back on buzz of govt examining tax concerns of FPIs

The buzz of the finance ministry examining the tax concerns of foreign portfolio investors (FPIsFPIs) sparked a sharp rebound in the domestic equity market on Friday, even as most global bourses tumbled amid a fresh spike in tensions between the US and China. A 7 per cent decline in Brent crude prices on Thursday night helped ease some concerns on the macroeconomic front.
After dropping as much as 410 points in intra-day trade, the benchmark Sensex recouped all the losses to end 100 points higher at 37,118. The 50-share Nifty ended slightly below 11,000, a psychologically important level.

The rebound happened after media reports said the government was likely to put on hold a plan to raise the minimum public shareholding in listed companies to 35 per cent from 25 per cent. The government, the reports said, was also looking for ways to ease concerns of FPIs, which have pulled out of the Indian equity market after the Budget announcement of higher taxes for individuals and trusts earning more than Rs 2 crore a year.
“We may not notify this year the 35 per cent minimum shareholding norm as we have got some representation on the issue and we will look into it in detail and understand the viability of such a proposal,” a source, who is dealing with the matter, told Reuters.
Rattled by the escalation in the long-running trade dispute between the US and China, global equities tumbled, with most markets in Europe, China and Hong Kong declining close to 2 per cent. US President Donald Trump on Thursday announced a 10 per cent tariff on an additional $300 billion of Chinese imports from September, spooking the investors. He further said that high-level talks between the two sides in Shanghai had gone badly. China’s commerce ministry responded by vowing to retaliate with necessary counter measures.
Since the Union Budget, the benchmark Nifty has lost nearly 8 per cent amid selling to the tune of Rs 12,000 crore by FPIs. On Friday, FPIs offloaded shares worth nearly Rs 2,900 crore, while domestic institutions provided buying support to the tune of Rs 2,800 crore. Indian markets have lost Rs 13.6 trillion in market capitalisation since July 5, when the new tax surcharge was announced by Finance Minister Nirmala Sitharaman.
Chart “In a gloomy market environment, the imposition of tax surcharge has affected about 40 per cent of FPIs and triggered a significant outflow in July, compared to inflows in June. In the near term, we expect the market to be range-bound, with a negative bias,” said Ravi Sundar Muthukrishnan, head of research, Elara Capital.
Andrew Holland, chief executive officer, Avendus Capital Public Markets Alternate Strategies, said: “If the pre-Budget tax regime is restored, you could see better flows to India.”
The benchmark indices have logged their fourth consecutive weekly fall — the longest losing streak since September 2018, when the IL&FS crisis came to light.
Market players say the FPI taxation is only one of the many headwinds faced by the domestic markets. “India’s GDP has been deteriorating over the past few quarters. Most key engines of GDP growth — private consumption, private capital expenditure, net exports and public infrastructure spending — are facing stiff challenges. Rural distress, the NBFC crisis, declining consumer confidence, and elevated unemployment levels suggest consumption is unlikely to pick up anytime soon. Challenging global growth environment is likely to persist, which is a negative for exports. In effect, the government’s infrastructure spending — railways, defence and other public infrastructure — is the only hope to spur economic growth in the medium term,” said Muthukrishnan.
Markets bounce back on buzz of govt examining tax concerns of FPIs

FPIs' bullish stance continues; pump in Rs 63.10 bn in Nov on crude, rupee

Foreign investors have pumped in Rs 63.10 billion into Indian capital markets this month so far, after pulling out massive funds in October, on easing crude oil prices and a strengthening rupee.
Of these, most of the funds were infused in the debt market by foreign portfolio investors (FPIs), the latest data with depositories showed.
The recent inflows come after a net outflow of more than Rs 389 billion in October, which was the steepest withdrawal in nearly two years.
FPIs pulled out over Rs 210 billion from capital markets (both equity and debt) in September. Before that, they had put in Rs 750 billion in July and August.
Overseas investors infused Rs 9.23 billion in the equity market during November 1-22, and Rs 53.87 billion in the debt market, taking the total to Rs 63.10 billion (USD 862 million), the data showed.
According to experts, an appreciating rupee and fall in oil prices provided a leeway to India's macros and accordingly influenced FPIs to change their stance towards emerging markets.
"The latest inflow could be attributed to falling in crude prices, recovery in rupee against the dollar and improvement in the liquidity situation," Himanshu Srivastava, Senior Analyst Manager Research, Morningstar Investment Adviser India said.
On the global front, escalating trade war tensions between the US and China caused widespread uncertainty in emerging markets. This, coupled with increasing interest rates globally, turned investors risk-averse the world over, which prompted them to look for other attractive and safer alternatives, he added.
"I don't expect any significant inflow from FPIs in the remaining part of this year. Movement of rupee versus the dollar, the direction of crude prices, domestic liquidity, upcoming state elections as well as general elections next year are some of the factors which the FPIs would be watching closely.
"Plus, there are other emerging markets like China and Brazil which are better placed in terms of valuation compared to India.
"Looking at all these factors and the ongoing scenario, there is still some time before India sees strong inflows from FPIs," he added.
FPIs have pulled out over Rs 940 billion from the capital markets so far this year. This includes more than Rs 410 billion from equities and nearly Rs 530 billion from the debt market.

FPIs invest over $1 bn in Nov so far on easing oil prices, rupee recovery

Foreign investors have pumped in nearly Rs 82.85 billion into the Indian capital markets so far this month, after pulling out hefty funds in October, due to fall in crude oil prices, recovery in rupee and improvement in the liquidity situation.
The recent infusion comes following a net outflow of more than Rs 389 billion in October, which was the steepest withdrawal in nearly two years.

Foreign portfolio investors (FPIs) had pulled out over Rs 210 billion from the capital markets (both equity and debt) in September. Before that, they had put in Rs 75 billion in July and August.
According to depositories data, FPIs infused Rs 38.62 billion in the equity markets during November 1-16, and Rs 44.23 billion in the debt market, taking the total to Rs 82.85 billion (USD 1.14 billion).
Himanshu Srivastava, Senior Analyst Manager Research, Morningstar Investment Adviser India, attributed the latest inflow to fall in crude prices, recovery in rupee against the dollar and improvement in the liquidity situation.
On the global front, escalating trade war tensions between US and China has caused widespread uncertainty in emerging markets. This, coupled with increasing interest rates globally, has turned investors the world over risk-averse, which prompted them to look for other attractive and safer alternatives, he added.
"I don't expect any significant inflow from FPIs in the remaining part of this year. Movement of rupee versus dollar, direction of crude prices, domestic liquidity, upcoming state elections as well as general elections next year are some of the factors which the FPIs would be watching closely.
"Plus, there are other emerging markets like China and Brazil which are better placed in terms of valuation compared to India.
"Looking at all these factors and the ongoing scenario, there is still some time before India sees strong inflows from FPIs," he added.
FPIs have pulled out over Rs 920 billion from the capital markets so far this year. This includes more than Rs 380 billion from equities and nearly Rs 540 billion from the debt market.