FPIs Withdraw Improved to an Extent. Is it a Sign of Improvement?

The sentiment in the Indian stock market is so low that despite the relatively lower COVID-19 cases, the Indian stock market has performed worst amongst the global peers. India’s benchmark indices have lost around 30 per cent in just a couple of months meanwhile the Chinese indices only had seen around 3 per cent of fall. India is amongst those countries who have witnessed the highest value erosion so far. On top of that, the Foreign Portfolio Investors (FPIs) had sold over Rs. 60,000 crores worth of equities in just March month. It created a panic selling in the market resulting many investors had to withdraw and incurred losses out of their investments.  

All this points out that the Indian economy is most impacted by the lockdown than the COVID-19 cases. However, the good thing is, amongst all this, the investors haven’t lost faith in the stock market and continuing planning their next investments amidst all this. According to the Association of Mutual Funds of India (AMFI), the market witnessed the biggest equities inflows of Rs. 11,485 crore in the same month when the FPIs withdraw Rs. 60,000 crore worth of equities – the highest in last 12 months. In a sharp contrast of FPIs outflows, the net equity inflows showed robustness despite that the offline channels were closed due to 21-days lockdown.

Now, the Foreign Portfolio Investors (FPIs) have withdrawn near around Rs. 12,650 crores from Indian capital markets in April so far. From April 01 to April 17, the FPIs has withdrawn around Rs. 3,808 crores from equities and Rs. 8,842 crore from the debt segment. If we take a look at the net outflows of April so far and compared it with the previous month then we can say that FPIs withdrawal have improved to an extent, at least from equities.

Citing the reason for net inflows in these days of April, it is observed that the global markets are becoming more stable as it is believed that the coronavirus has peaked in many parts of Europe which aiding the investors’ sentiment. On of that, the oil deal between OPEC and Russia is also contributing to the relatively more stable markets. However, we should understand that this slowdown in net outflows in not the indication of recovery in the Indian capital markets as the situation is still critical in major parts of the country like Mumbai, Delhi, Gujurat etc. The whole country is under lockdown. With the rise in the no. of cases and unavailability of vaccine, the underlying environment will most likely continue to be negative.

But, the investors can still take it as a sign of improvement for Indian capital markets gaining trust among foreign investors for doing well in containing the virus. In addition to that, the RBI’s recent announcements and measures would also be resonating the investors. The current downturn in the market provides the investors with the opportunity for buying stocks at relatively attractive prices and make investments for the long-term. But, at the same time, the investors must be prepared for the bumpy ride ahead.

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