COMMENT: Half of emerging market withdrawals by FIIs are from India

Shishir Asthana

Moneycontrol Research

Both global and Indian markets won’t easily forget November 9 – a date that will forever be remembered for two key developments. The world woke up to a surprise outcome of US election with Donald Trump winning the elections against Hillary Clinton. Markets opened with a gap down but soon recovered. Indian indices, too, behaved in a similar manner but since then they have largely been out of sync with world markets.

Indian markets have had a double whammy impact with the outcome of US elections coinciding with the demonetisation announcement on November 8.

As though the two big events were not enough US Fed’s decision to hike interest rate also resulted in FIIs withdrawing about USD 18 billion from emerging markets since Trump’s victory. The Institution of International Finance points out that the outflows are the longest continuous reversal since 2005.

India has seen over Rs 19,000 crore or USD 2.85 billion being invested in the equity market since November 9.  Out of the USD 18 billion that has been withdrawn about USD 6.7 billion belonged to equities. Thus, nearly 42.5 percent of all equity withdrawals from emerging markets are from India. Debt markets in India have seen much higher withdrawals of Rs 39,603 crore or USD 5.95 billion during the same period. A total of USD 8.8 billion or nearly half of all withdrawals from emerging markets are from India.

As a result of the withdrawals Indian markets have fallen 5.7 percent from November 9 till now, but the subcontinent is still not a basket case among the BRICS nations. Brazil with a fall of 10.1 percent has seen the biggest drop since November 9. Russia on the other hand has seen a gain of 10.84 percent while South Africa has fallen marginally by 1.74 percent. Despite the rhetoric against China by Trump, Shanghai’s index has remained unchanged.

Indian markets, however, are among the favourite investing destinations by brokers, according to a Bloomberg article. One hopes FIIs are listening to these brokers.