How Brexit pushed fund managers into corner, cost India $92 mn

By: | Updated: June 25, 2016 8:35 AM

An FE analysis reveals that until Friday, the UK accounted for over a third or close to $1.1 billion of the total FPI flows into India so far in 2016. Not that other emerging markets (EMs) managed to escape unscathed.

Brexit, European Union, Britons, Norway, North Sea, Brussels, Britons, Beijing voteBrexit: An FE analysis reveals that until Friday, the UK accounted for over a third or close to .1 billion of the total FPI flows into India so far in 2016. Not that other emerging markets (EMs) managed to escape unscathed. (Reuters)

With the UK deciding to move out of the European Union, foreign portfolio investors (FPIs) on Friday pulled out close to $92.5 million from Indian equities.

Some market participants FE spoke to said some part of this could belong to funds in the UK.

Also Read: Brexit: As UK walks alone, India shrugs off impact

“With the British pound at a three-decade low, a lot of fund managers in the UK would have got margin calls this morning. Given that they had brought in significant amounts earlier this year, some of them had no choice but exit,” a dealer at a brokerage house with several FPI clients said on the condition of anonymity.

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An FE analysis reveals that until Friday, the UK accounted for over a third or close to $1.1 billion of the
total FPI flows into India so far in 2016. Not that other emerging markets (EMs) managed to escape unscathed.

EMs in Asia, including South Korea, Taiwan and Thailand, saw foreign funds turning risk averse with Taiwan alone witnessing an FPI outflow of over $412 million from its equity markets on Friday.

Andrew Holland, CEO, Ambit Investment Advisors, is of the opinion that no EM would be spared in case of a contagion.

“All EMs would be equally hit and India won’t be spared. People are unhappy and moving to a political environment due to which the European Union could face massive trade, asset and currency problems. In the coming weeks, India should see negative flows from foreign funds,” he observed.

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