What began as a reaction to a higher consensus weighting on Indian equities and weak momentum in corporate earnings is turning into a correction that could see India’s benchmark indices ending in the red for a second consecutive month. Global factors like a contagion risk from Greece’s exit from the euro zone and a possible fund outflow following a rate hike by the US Federal Reserve are weighing on the performance of some of last year’s best performing markets including India. Apart from global factors, several domestic developments including the government’s inability to convince the Opposition on the amended land Bill and, crucially, its insistence on levying a minimum alternate tax (MAT) on foreign portfolio investors are adding to the selling pressure.
FPI purchases of Indian equities have been slowing since mid-March. Compared to the 21-day rolling average FPI purchases of $145 million on March 20, the average buying has fallen to $33 million as of Monday. In the last six trading sessions, barring Tuesday where the reported numbers reflect the block deal through which Daiichi Sankyo exited Ranbaxy, FPIs have sold at least $500 million worth of Indian shares.