Continuing their selling spree, foreign investors have pulled out nearly Rs 1,200 crore from the debt markets in the first two weeks of the month on higher fuel prices and possibilities of rate hike by the US Federal Reserve.

UIDAI makes mandatory for Aadhaar authenticators to accept Virtual ID; FDI inflow growth rate dips to 5-year low in FY18 and FPIs outflow hits 10-yr high at Rs 48,000 cr. BusinessToday.In Editor Rajeev Dubey explains this and more on The Good, The Bad and The Ugly.

The sharp increase in inflows comes after an outflow of over Rs 3,500 crore by foreign portfolio investors (FPIs) from the capital markets in December, data compiled by depositories shows.

Overseas investors poured in a staggering Rs 1.5 lakh crore in the Indian debt markets in 2017 on the back of higher bond yields and stable currency, after pulling out massive funds in the preceding year.

Foreign investors are flocking to the Indian capital markets in a big way with a net inflow of more than Rs 2 lakh crore of so-called 'hot money' in 2017, with equities alone getting over USD 8 billion - an amount bigger than the cumulative investment of the previous two years.

After two months of intense selling, foreign investors turned net buyers in October to invest over Rs 3,000 crore in stocks, enthused by the government's Rs 2.11 lakh crore bank recapitalisation plan.

Foreign portfolio investors (FPI) have pulled out more than Rs 7,300 crore from the equity markets this month so far as they flee to safe haven assets amid geopolitical tensions and some domestic concerns.

A 50 basis points repo rate cut could attract an average annual flow of Rs 48,000 crore in government bonds from overseas investors

Overall, so far this year, FPIs have invested Rs 8,515 crore in equities while withdrawing Rs 2,810 crore in the debt market, resulting in a net inflow of Rs 5,705 crore.

To honour redemptions, mutual funds had to liquidate their holdings in the capital market after nearly two years. Mutual funds pulled out Rs 2,698 crore in April 2014, after which they continued to infuse funds till March 2016 when they were net sellers to the tune of Rs 10,199 crore.

This also marks the first outflow since May 2014, when MFs had pulled out Rs 1,078 crore. Prior to that, they had been continuously infusing money into stock markets.

In contrast, the debt market kept overseas institutional investors captivated with its relatively steadier return promise and attracted net inflows in the excess of Rs 50,000 crore.

FPIs had invested Rs 20,691.5 crore in the capital markets in October 2015.

This is the highest investment by FPIs since March when they had poured in Rs 20,723 crore into Indian markets.