Foreign portfolio investors (FPIs) turned net sellers in April and pulled out Rs 9,659 crore from Indian equities, spooked by the intense second wave of coronavirus and its economic fallout, according to data available with depositories.
"This was the first net withdrawal since September 2020, when they had pulled out a net of Rs 7,782 crore from equities," the data showed.
"Prior to the last month's outflow, FPIs invested over Rs 1.97 lakh crore in equities between October 2020 and March 2021. This included a net investment of Rs 55,741 crore in the first three months of this year," it added.
"If the fear of COVID-19 increases among foreign investors, we can witness further redemptions, which can result in some more volatility in the market. The selling by FPIs is attributed to their nervousness about the second wave of the pandemic," Harshad Chetanwala, the co-founder of Mywealthgrowth.com, told PTI.
"There has generally been a slowdown in foreign inflows into emerging markets. Particularly in the case of India, the intense second wave of coronavirus and its fallout on the economy has led to some selling pressure by foreign institutions," said Gaurav Dua, SVP, Head - Capital Market Strategy, Sharekhan by BNP Paribas.
"We have witnessed the lockdown impact on the economy in 2020 when GDP growth rate fell from 1.1 per cent in Q1 2020 to -25.90 per cent in Q2 2020," stated Brijesh Bhatia, Senior Research Analyst, Equitymaster.
"India is struggling with the lockdowns due to the rise in COVID-19 cases. Uncertainty over the quick recovery of economy hinders, which is the major reason for money flowing out from India," he added.
"Since the COVID-19 pandemic has spread across various countries and regions, foreign investors have turned risk-averse. Consequently, they shifted their focus towards safer investment options or safe havens such as gold or US dollar, as against investing in fixed income securities of emerging markets like India, where risks are relatively higher," said Himanshu Srivastava, Senior Analyst-Manager Research, at Morningstar India.
FPIs offloaded debt securities worth Rs 118 crore last month. They have been a net seller in the segment since January. On a year-to-date (YTD) basis, they have invested a net sum of Rs 46,082 crore in equities, however, the FPIs pulled out a net amount of Rs 15,616 crore from debt securities.
"We are still some time away in terms of recording peak cases, which means there could be more negative news flows on the COVID front," said Rusmik Oza, Executive Vice President and Head of Fundamental Research at Kotak Securities.
Also, the steep rise in copper and steel prices to a near-decade high will also be a cause of concern for the entire manufacturing sector, he added.