Mumbai: Foreign portfolio investors (FPI) continue to shy away from domestic equity markets in November after remaining heavy sellers over the last two months as the fear about an interest rate hike in the United States and the regulatory spat between the Reserve Bank of India (RBI) and the government have forced many of them to take a cautious approach.
According to Emerging Portfolio Find Research (EPFR), flows for Indian equity funds were negative for the 12th straight week and 22nd time in the past 25 weeks during the first week of November.
However, the FPIs pumped in nearly Rs 4,800 crore into the Indian markets in the last five trading sessions. “Continued fall in oil prices and drop in yield eased liquidity concerns,” said Vinod Nair, Head of Research, Geojit Financial Services.
EPFR, however, noted that Prime Minister Narendra Modi’s reform story has been showing wear for some time and the current spat with the RBI over the appropriate use for “excess reserves” has added to investor fatigue with this market.
As per the data available with the National Securities Depository Ltd (NSDL), FPI’s offloaded equities worth Rs 28,921 crore in October and Rs 10,825 crore in September 2018. In the current calendar year till date, they are net sellers of equities to the tune of Rs 41,923 crore and have also sold debt instruments worth Rs 53,597 crore.
EPFR also highlighted the concern among the fund managers as allocations to India dropped sharply coming into the fourth quarter, with the average weighting among global emerging market (GEM), Asia ex-Japan, and BRIC Equity Funds falling to seven, nine, and 59th month lows.
With the US mid-term elections and the US Federal Reserve’s second-to-last meeting of 2018 on the horizon, investors found little reason during the first week of Novem-ber to break out of the cautious, Asia-centric pattern they have been following since early October, it added.
However, it added that the flows to EPFR-tracked Emerging Markets Equity Funds broadened in early November, moving beyond China and Korea Equity Funds to the diversified Global Emerging Markets (GEM) Equity Funds and funds dedicated to Brazil. Year-end bargain hunting and hopes that the political landscape in the US following the mid-term polls will be more trade-friendly helped boost flows, with the total for all funds hitting a 31-week high.
