Foreign investors fled the Indian Stock market in the year 2018, marking one of the worst outflows ever.FIIs turned out to be a net seller in all major Asian markets, except China. Emerging Markets including India witnessed a negative outflow owing to a more attractive avenue for investors outside the country.
As per the data released by National Securities Depository Ltd (NSDL) showed that foreign investors withdrew equities and other instruments worth Rs 80,919 crore in 2018. The equity segment solely accounted for Rs 33,014 crore of outflow. This outflow was the second highest after 2008 when the global financial slowdown shook the world.FIIs have been a net seller, only thrice since 2002.
The market pundits believe that the key reasons behind this withdrawal were due to rising in interest rate by the US, raging trade war between economies like USA and China, rising oil price on the global level and state assembly elections in the country.
As per the World Bank Report and estimates released by the IMF, India is going to be the fastest growing economy amongst the emerging economies, amidst a global slowdown in 2019.
The World Bank Report paints a dark picture for the world economic growth, broadly. It forecasts global growth to be slow-moving at the rate of 2.9 percent for the current year, from an estimated 3 percent for the last year. The world economy is expected to grow only by 2.8 percent in the next two years viz 2019, 2020.
India on the other hand, is expected to grow at 7.5 percent in the year 2019-20, retaining its spot as the fastest growing emerging market economy.
The improving growth rate coupled with healthy corporate balance sheets and rising inflow from the domestic savings especially through the SIP route is expected to grab the attention of the foreign investors back.
However, worries over India’s fiscal Health in a run-up to the Union elections and political instability caused therefrom may still haunt the decisions of the foreign investors. This may scare some foreign portfolio investors and may prompt them to pull out funds from the Indian capital market.
The market is assessing various possible outcomes to the general assembly elections, due in April-May 2019. Bhartiya Janta Party’s win in the upcoming elections has started to price in. Though investors have mixed views on the return of Modi to power, they find Indian Market’s risk to reward ratio to be unattractive before elections.
Whether the FIIs will make a comeback or not is merely a matter of discussion at present and probably only time will tell what it has in store for the investors.
Read Our Special Coverage on Domestic Investors Saved The Indian Market
