Foreign portfolio investors (FPI) turned net sellers in Indian markets by pulling out Rs 2,038 crore so far in September as participants turned cautious in view of rising Indo-China tensions and weak global cues.
According to the depositories data, a net Rs 3,510 crore was withdrawn from equities, while Rs 1,472 crore was pumped into debts by FPIs between September 1-11.
FPIs were net buyers for three consecutive months — June to August.
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 adopted a cautious stance towards investing in the Indian equity markets since the beginning of September,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, noted.
Citing the reasons, Srivastava said the sharp slowdown in the Indian economy during the quarter ended June 2020 dented investor sentiments and FPIs preferred to stay on the sidelines also because of weak global cues and rising border tension between India and China.
The recent net outflows could also be attributed to profit-booking by FPIs on the back of surge in the Indian equity markets, he added.
Regarding investment in the debt segment, Srivastava noted that amidst aggressive bond buying by the US Fed, the yields there have come down which could be one of the reasons for FPIs to look for other attractive investment destinations like Indian debt markets that could potentially offer better returns.
However, relatively lesser quantum of net inflows also indicates that FPIs are yet to gain a relatively high level of conviction on the Indian debt markets to invest substantially, he added.
Going forward, "on the domestic front, the challenges with respect to rising COVID-19 cases and recovery of economic growth remains and escalation of tension between India and China at the border may not augur well for the markets,” Srivastava said.
He further noted that on the global front, rising COVID-19 infection and tension between US and China could turn investors risk averse if the scenario demands.