Foreign investors dump Indian equities, debt worth $5 billion in November

Concerns over demonetisation slowing the Indian economy and fears of a rate hike by the US Federal Reserve have resulted in foreign investors pulling out about $5 billion from the capital markets in November so far. 

Foreign portfolio investors (FPIs) withdrew Rs 15,763 crore from equities during November 1-25, while withdrawals from the debt market were recorded at Rs 16,154 crore during the same period. This resulted in a total outflow of Rs 31,917 crore ($4.7 billion), Press Trust of India reported, citing the exchange data. 

The outflows followed withdrawals of more than Rs 10,306 crore from the equity and debt markets in October. In the current year, however, FPIs have invested about Rs 37,146 crore in stocks while they withdrew about Rs 13,278 crore from the debt market, resulting in a combined net inflow of Rs 23,868 crore. 

Prime Minister Narendra Modi's demonetisation drive to curb black money and the subsequent cash crunch further fuelled the selling pressure as investors worried this may slow down the demand in the economy. FPIs starting pulling out of emerging capital markets in October 2016 amid the uncertainty over the US election results and this was felt across emerging markets. 

"This was further exasperated in November due to several factors -the uncertainty over US ties with the emerging markets, post Trump victory, the near-term impact on corporate earnings, and economic growth from demonetisation in the near term and impact of GST on companies' near-term cash flows," Vidya Bala, FundsIndia.com COO Head of Mutual Fund Research, was quoted as saying by PTI.