As the market correction has intensified, foreign portfolio investors (FPIs) sold nearly $100 million worth equities per day in the past 14 trading sessions.
Bloomberg data shows that since the beginning 2016, FPIs have liquidated $1.42 billion worth of Indian equities, with the Sensex losing more than 6% of its value.
On Wednesday, the Sensex closed at 24,062.24, down 1.7% or 417.80 points, while at 67.97 against the dollar, the rupee fell to its lowest since September 2013.
While concerns over recovery in domestic earnings growth remain, much of this selling was triggered by worries over the slowdown in China and its likely impact on the global economic growth. Fear of the slowdown is well reflected even in the sharp decline in benchmark crude oil prices, with Brent having lost close to 25% in 2016 and now trading near its 13-year low of $27.7 per barrel.
As such, FPIs have been trimming their exposure to the Indian market for most part of 2015 as the plunge in crude oil prices have restricted fund flow from many West Asian countries. FPIs have also grown risk-averse towards the emerging market universe as a whole.
According to the latest global fund managers survey by Bank of America Merrill Lynch, investors cut their exposure to equities and raised cash levels from 20% in the previous month to to 38% in December, the highest since mid-2012. The survey showed that global investors’ allocation to emerging markets equities fell further to record lows since 2006 on account of weakening growth prospects of China, a deteriorating earnings outlook (the worst since 2002) and a challenging macro environment amid a strengthening US dollar and potential higher bond yields.