Overseas investors have pulled out nearly Rs. 1,700 crore from the Indian stock markets so far in January following a steep fall in crude oil prices amid slowing global growth.
The outflow comes after FII investments in equities hit a 10-month low of Rs. 2,100 crore in December.
These investors got re-christened as FPIs or Foreign Portfolio Investors last year under a new regulatory regime that promises to make it easier for them to invest in India.
Foreign investors were gross buyers of equities worth Rs. 18,544 crore between January 1 and 9, while they sold shares amounting to Rs. 20,216 crore — a net outflow of Rs. 1,673 crore ($264 million) for the period, latest data with Central Depository Services Ltd (CDSL) showed.
Debt market inflows
However, overseas investors took a bullish stance on the Indian debt market and invested Rs. 2,620 crore during the period.
Market analysts attributed the FIIs outflow to fall in crude oil prices.
“The steep decline in oil price is positive for all consumers including big importers like India, as it helps in narrowing their trade deficit and strengthens their currencies,” CNI Research Head Kishor Ostwal said.
“In contrast, for the oil producers this is a negative news as it lowers their export earnings. Given that many countries are dependent on oil exports, their growth would be affected,” he added.
Crude oil prices
Brent crude oil price is hovering at around $51 per barrel. On January 7, it fell below $50 a barrel — first time since May 2009 — mainly due to increased supply of oil and slowing global growth. It had dropped to as low as $49.66 a barrel on that day.
In 2014, the net investment by overseas investors into the equities was Rs. 98,150 crore, while in the debt market it was Rs. 1.6 lakh crore, aggregating Rs. 2.58 lakh crore.