Foreign portfolio investors (FPIs) pulled out a net Rs 6,105 crore from the Indian capital markets so far in the ongoing financial year amid the pandemic and resultant restructions in many parts of the country.
The equity benchmark BSE Sensex has jumped 3,077.69 points or 6.21 per cent during April-July this fiscal.
Reflecting an upbeat sentiment in the market, the benchmark had reached its all-time high of 53,290.81 on July 16, 2021. It closed at its lifetime high of 53,158.85 on July 15.
According to the depositories data, Rs 6,707 crore were withdrawn on a net basis from equities during the initial four months of this fiscal.
At the same time, a net sum of Rs 602 crore were invested in the debt segment.
This took the total net withdrawl to Rs 6,105 crore during the period under review.
The data showed that FPIs were net sellers in all the months barring June when they had invested Rs 13,269 crore.
The net outflow stood at Rs 9,435 crore in April, Rs 2,666 crore in May and Rs 7,273 in July.
"What is encouraging during the first four months is the fact that the number of new investor registrations in India is up 2.5 times year on year as per data released by the NSE," said S Ranganathan, head of research at LKP Securities.
Market experts noted that the financial year started with a surge in COVID-19 cases and the consequent restrictions imposed by various states which dented investors' sentiment.
June witnessed a gradual opening up of the localised lockdown and improved investor sentiments on the back of consistently falling coronavirus cases in the country, hopes of an early opening of the economy along with good quarterly results as per Himanshu Srivastava, associate director - manager research, Morningstar India.
"FPIs started to turn cautious towards Indian equity markets from mid of June and continued with the same stance through July. US Fed's hawkish statement that it might raise interest rates much earlier than assumed was the precursor for the change in their stance," Srivastava added.
He further said that there are outflows but they are not exorbitantly high and this signifies that foreign investors are adopting a cautious stance towards Indian equities rather than turning negative on it.
Going forward, on the back of US Fed monetary policy which is keeping its benchmark policy rate unchanged, while indicating that they have begun talking about scaling back bond buying, and rising crude oil prices, FPI flows in the domestic market is expected to remain volatile, said Shrikant Chouhan, executive vice president, equity technical research at Kotak Securities.