FPI outflow hits 18-month high at Rs 297 bn on surge in crude prices

Foreign investors pulled out a massive Rs 297.14 billion from the capital markets in May, making it the biggest outflow in 18 months, primarily due to a surge in global crude prices.

This comes following an outflow of Rs 155.61 billion from the capital markets (equity and debt) in April. Prior to that, foreign investors had pumped in Rs 26.62 billion in March.

According to the latest depository data, foreign portfolio investors (FPIs) withdrew a net sum of Rs 100.60 billion from equities and another Rs 196.54 billion from the debt market in May, taking the total to Rs 297.14 billion (USD 4.4 billion).

This is the steepest outflow from the capital market since November 2016, when FPIs had pulled out Rs 393.96 billion.

Harsh Jain, the chief operating officer at Groww, an investment platform, attributed the outflow mainly to rise in the cost of crude oil prices. This would impact all the oil importing economies, including India, and adversely affect its current account deficit, fiscal deficit, imported inflation and create headwinds for economic growth.

Besides, investors were cautious about US President Donald Trump's meeting with North Korean leader Kim Jong Un. The US has also threatened to impose tariffs on auto imports.

Also, FPIs had begun profit booking before the Karnataka elections, which was a crucial indicator for the 2019 big elections results, he added.

"Another discomfort among the FPI (Category III) was Sebi's requirement for additional documents from the key people in such a fund. Their concern is around the privacy and data theft," Jain noted.

So far this year, FPIs have pulled out over Rs 21 billion from equities and withdrew more than Rs 300 billion. FPI outflow hits 18-month high at Rs 297 bn on the surge in crude prices from the debt market.