India has accounted for nearly one-third of foreign fund outflows witnessed by emerging markets (EMs) since the beginning of current calendar year.
Foreign portfolio investors (FPIs) have offloaded equities worth $2.3 billion from the Indian markets, Bloomberg data showed. Among EMs, this is second only to South Korea, which witnessed an outflow of $2.9 billion. FPIs have withdrawn $8.1 billion from the EMs so far in calendar 2016.
.“Selling by FPIs was on account of outflows from global emerging market (GEM) benchmarked funds and redemption pressure from sovereign wealth fund (SWF) investors globally,” said Manishi Raychaudhuri, Asia-Pacific equity strategist of BNP Paribas. Domestic institutional investors (DIIs) have been net buyers in the Indian markets in contrast to FPIs, he added.
DIIs have bought equities worth more than R17,000 crore in the calendar so far, Bloomberg data showed. The calendar 2015 was the best-ever year in terms of DII buying. Domestic funds comprising insurance companies, mutual funds and financial institutions bought equities of R70,000 crore, data showed. “DII witnessed inflows to equity funds due to very little investment options available to retail investors as most property markets and commodities were giving negative returns,” Raychaudhuri said.
Selling by foreign funds comes in contrast to the relative outperformance of Indian equity markets in the EM universe during the previous calendar. In CY15, when foreign funds were net sellers across the EMs, India witnessed inflows to a tune of $3.2 billion, Bloomberg data showed.
Indian markets continue to command premium valuations despite sharp correction in equities. The one-year forward valuations of Sensex was 14.2 times, the highest among EMs, Bloomberg data showed.