Capital flight: Foreign investors pull out $256 million in February so far

Updated: February 23, 2019 7:23:37 AM

Foreign portfolio investors (FPIs) have been net sellers in the bond markets in February so far pulling out nearly $256 million till February 22 on the back of various domestic concerns.

FPIs pull out 6 m in February so farFPIs pull out 6 m in February so far

By Aditya Rao

Foreign portfolio investors (FPIs) have been net sellers in the bond markets in February so far pulling out nearly $256 million till February 22 on the back of various domestic concerns.

In January FPIs sold bonds worth $369.85 million; in 2018 they sold $5.9 billion worth of bonds.

The rupee, which was ruling at 69.4350 to the dollar on January 1, depreciated to 71.1413 on Friday partly due to the sales by FPIs in the bond and equity markets.

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“The cost of hedging the currency risk has gone up to 8% from 6% annualised. The cost of funds of investing in India has gone up substantially, which is preventing people from getting in the fresh money, and also some people might be pulling out money,” said Sandeep Bagla, a dealer from the Trust Group.

Increased anxiety over the corporate balance sheets, problems in non-banking financial companies (NBFCs) and their liquidity in the market are also making FPIs uncomfortable.

NBFCs have been going through a liquidity crisis since the debt-ridden Infrastructure Leasing and Financial Services (IL&FS) defaulted on it various debt obligations in August 2018. Some banks and other lenders had invested in IL&FS through commercial papers and non-convertible deposits.

As of February 22, FPIs have utilised 70.73% of their investment quota of `2.2 lakh crore in the central government securities. While, they have utilised 71.05% of their `2.9 lakh crore investment quota in corporate bonds till February 21.

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