Foreign investors pull out Rs 8,319 cr in Aug amid trade worries, FPI tax

So far in August, FPIs have been net sellers for nine out of 10 trading sessions, indicating "extreme negative sentiment", Himanshu Srivastava, senior analyst manager research at Morningstar said.



Foreign investors pulled out Rs 8,319 crore on a net basis from capital markets in the first half of August, continuing their selling spree in the Indian market amid uncertainty over FPI tax and global trade worries.


During the last week, nine of the 10 most valued Indian companies suffered a combined loss of ₹84,354.1 crore in their market valuation last week mainly dragged down by Tata Consultancy Services (TCS).


During the holiday-curtailed week, the BSE Sensex lost 231.58 points.


According to the depository data, foreign portfolio investors (FPIs) sold equities worth Rs 10,416.25 crore on a net basis during August 1-16 period.

FPIs, however, invested a net Rs 2,096.38 crore in the debt securities during the period.


So far in August, FPIs have been net sellers for nine out of 10 trading sessions, indicating "extreme negative sentiment", Himanshu Srivastava, senior analyst manager research at Morningstar said.


In July, FPIs had withdrawn a net sum of Rs 2,985.88 crore from the Indian capital markets (both equity and debt).


"Prevailing uncertainty over the higher tax on FPI has negatively impacted foreign investors. They have been exiting Indian equities ever since the higher surcharge, or super rich', tax was introduced in the budget announced on July 5th," Srivastava added.


Besides, a mix of unconducive domestic and global factors have also contributed towards this exodus of foreign funds from the Indian equity markets in July as well as in August. While there has been a marked slowdown in India's economic activity, a sub-par monsoon and weak earning season have made matters worse.


Experts opined that the ongoing tension between the US and Iran and the continued trade war between the US and China have also impacted the investor sentiment.

Reliance Industries Ltd (RIL) was the only firm among the top 10 companies to post a gain in its market valuation during the last week trading..


The market capitalisation (m-cap) of RIL zoomed ₹72,153.08 crore to ₹8,09,755.16 crore at close on Friday after the announcement of a host of investor-friendly proposals at its annual general meeting early last week.


TCS, HDFC Bank, Hindustan Unilever Limited (HUL), HDFC, Infosys, ITC, Kotak Mahindra Bank, ICICI Bank and SBI closed the week with losses.


Amid lack of domestic triggers, equity markets would focus on global cues such as FPI investment trend, US-China trade talks and movement of oil and rupee this week, say experts.


Participants are also awaiting measures from the government to boost growth and revive consumer sentiment, they added.


"The result season has come to an end and majority of the companies delivered a disappointing quarter. With the slowdown looming on the economy, the companies could do very little to revive this quarter and are now mostly dependent on the government to boost sentiment and bring about a change at the grassroot level.


"Markets are likely to receive some boost this week due to government's impetus unless the trade war issue intensifies further," said Jimeet Modi, founder & CEO, SAMCO Securities & StockNote.


Ajit Mishra, vice president — Research, Religare Broking Ltd, said, "The earnings season has ended and there are no fresh key domestic triggers. Hence, the focus will now shift to earnings recovery and investors will also take cues from global developments. Investors would keep a close watch on progress on US-China trade talks, movement of crude oil price and rupee/dollar."    Concerns over economic slowdown, muted earnings, crisis in the auto industry and global trade issues have been weighing on investor sentiment, experts said.According to Vinod Nair, Head of Research, Geojit Financial Services, "Global issues are not subsiding while the domestic market is floating on hopes of stimulus package."    


"Global markets are seen ending in the red for the week on concerns of trade war. This is taking a toll on the global investor confidence. Indian markets also ended lower this week on disappointing earnings and selling by FIIs," said Sanjeev Zarbade, VP PCG Research, Kotak Securities.