FPIs in ‘wait and watch’ mode ahead of general elections

Foreign investors pull out Rs 5,300 crore from Indian stocks in January.

Foreign Portfolio Investors (FPIs) withdrew over Rs 5,300 crore from the Indian capital markets in January, according to a PTI report published in Financial Express. The FPI outflow is being seen as a sign of the ‘wait and watch’ approach ahead of the general elections. Notably, FPIs had infused a net sum of over Rs 17,000 crore in the capital markets — equity and debt — during November and December 2018. However in October, they had pulled out Rs 38,900 crore.
 
According the report, FPIs pulled out a net amount of Rs 5,264 crore from equities and Rs 97 crore from the debt marketsin January, taking the total outflow to Rs 5,361 crore. “Investors are taking a cautious approach given their focus on global headwinds and upcoming general election,” the report quoted Vinod Nair, Head of Research, Geojit Financial Services Ltd. 
 
The report quoted Himanshu Srivastava, Senior Analyst Manager Research at Morningstar Investment Adviser India, as saying that it has not been a good start of the year with regard to FPI flows and it is obvious that they are continuing with their cautious or ‘wait and watch’ stance towards India, which they have been maintaining for a long time. He added that the focus  continues to be on economic growth and the general elections.
 
Movement in crude prices and currency, which would have a bearing on the country’s macro-environment, and worries over global trade war are some other factors that will continue to guide the direction of FPI flows. 
 
Alok Agarwala, Senior VP and Head Investment Analytics at Bajaj Capital, forecasts FPI flows would continue to be volatile in the coming months.
 
“The outflows could continue further with escalating trade disputes. The domestic macroeconomic concerns viz, weakness in currency, movement of crude oil prices, trade deficit would also weigh on inflows,” the report quoted him. “As a base case scenario, we could expect overall net flows to turn marginally positive in case external conditions improve in the next few months as one of the factors, that is oil prices, corrected sharply in last few months,” he added.
 

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