‘Foreign outflows likely to continue’

Foreign investors have started to take money off the Indian markets and the trend is likely to continue, as other markets such as Korea and Taiwan have become more attractive, an HSBC report said.

The potential for equity outflows has increased, with foreign positions looking “stretched” in India, said the global brokerage. It added that Indian markets experienced the first monthly outflow this year in May, while Korea and Taiwan saw inflows of $1.5 billion and $1 billion, respectively. In the first five months of this year, foreign investors put $7.6 billion in Indian markets.

Korea and Taiwan witnessed inflows of $8.6 billion and $8 billion, respectively. Overall, Asian markets (excluding Japan), attracted inflows of $25.4 billion in the first five months this year, HSBC said.

“Equity outflows have started, with the market (Indian) experiencing the first monthly outflow in 2015. We expect this trend to continue as other markets become more attractive,” HSBC said. According to HSBC, the dynamics of the Indian market started to change early this year, when investors realised reforms were going to take longer than expected, resulting in earnings pressure, while valuations remained at all-time highs.