Coronavirus Scare: Foreign Investors Set To Turn Net Sellers In Equities After 6 Months

Coronavirus Scare: Investors are assessing the severity of coronavirus epidemic and whether the outbreak will push major economies into recession, say analysts.

Coronavirus Scare: Foreign Investors Set To Turn Net Sellers In Equities After 6 Months

Before the current bearish trend, foreign investors had remained bullish since September last year

Foreign institutional investors have pulled out a net Rs 12,478.31 crore - or $1.71 billion - from domestic equities so far this month. That makes March the first month of net outflows, following six months in which foreign portfolio investors (FPI) remained net investors in the Indian equities. Before the current month, it was only in July and August last year that FPIs turned out to be net sellers of Indian equities. According to data from National Securities Depository, foreign investors dumped Indian equities on each of the six trading sessions so far this month, with net outflows totalling Rs 12,478.31 crore.

Domestic stock markets have slumped almost 7 per cent so far this month tracking a global selloff, as investors the world over assess the severity of coronavirus (COVID-19) epidemic and whether the outbreak will push major economies into recession.

The S&P BSE Sensex index has lost 2,662.34 points and the broader NSE Nifty 50 benchmark given up 750.3 points during this period, marking a slump of 6.95 per cent and 6.70 per cent respectively, exchange data shows. The S&P BSE Midcap and Smallcap indices - which gauge the mid-cap and small-cap segments - shed 7.16 per cent and 6.85 per cent respectively.

Before the current bearish trend emerged in foreign investment flows, FPIs were in a bullish mode starting September last year.

From September to February, foreign investors were net purchasers to the tune of Rs 66,428 crore in the domestic equity markets, with inflows averaging Rs 11,071 crore each month, according to NSDL data. During that period, the Sensex rose 2.58 per cent (964.50 points).

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At the current juncture, the domestic markets are mirroring the rout in global peers, the recent wild movement in crude oil prices and the turmoil in the financial sector in the backdrop of Yes Bank crisis and these factors are keeping investors on the back foot, say analysts.

MonthNet Investment (In Crore Rupees)
February 20201,820
January 202012,123
December 20197,338
November25,231
October12,368
September7,548
August-17,592
July-12,419
June2,596
May 7,920
April21,193
March33,981
February17,220
January-4,262
(Source: NSDL)

"Outflows from India are part of a global move out of equities and driven by redemptions from ETFs (exchange-traded funds) investing into emerging markets. Outflows currently are reaching panic proportions... and are unlikely to last much longer," said Sandip Sabharwal, a Mumbai-based fund manager.

He also said global stocks are deeply oversold a bounce-back can be expected sometime soon.

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Equities in other Asian markets have also faced sharp outflows. MSCI's broadest index of Asia-Pacific shares outside Japan has declined 3.47 per cent so far this month, and is down 11.8 per cent so far this year, after rising about 16 per cent in 2019.

Overseas investors have sold a net $9 billion worth of Asian equities so far this month, after offloading $5.6 billion last month, news agency Reuters reported citing data from stock exchanges in India, Indonesia, Philippines, South Korea, Taiwan, Thailand, and Vietnam.

Economists say the coronavirus outbreak is expected to take an economic toll in Asia given its trade and production linkages with China.

Back home, financial markets remained shut on Tuesday for the Holi festival, and will resume trading on March 11.