Long term funds too quit In­dian mar­kets

Ru­pee de­pre­ci­a­tion, Fed rate hike fears cited as rea­son


The de­pre­ci­a­tion of ru­pee against dol­lar and fear about in­ter­est rate hike in the US had trig­gered heavy re­demp­tions in In­dia-fo­cused off­shore funds, which are con­sid­ered to be long term in nature. This, ac­cord­ing to ex­perts, has caused heavy sell­ing in do­mes­tic eq­ui­ties over the last four months.

Data re­leased by Morn­ingstar, a global mu­tual fund re­search com­pany, showed that the In­dia fo­cused off­shore funds wit­nessed a net out­flow of $966 mil­lion while In­dia fo­cussed Ex­change Traded Funds (ETF’s) be­lieved to be short term in nature saw a net out­flow of $940 mil­lion dur­ing the pe­riod.

“The mov­ing out of long-term money from the coun­try is def­i­nitely a con­cern­ing fac­tor but not un­ex­pected,” said Hi­man­shu Sri­vas­tava, se­nior re­search an­a­lyst and man­ager re­search, Morn­ingstar In­vest­ment Ad­viser In­dia.

He be­lieves that few in­vestors who have been in­vested in the In­dian mar­kets over the last 3-5 years or even more might have cho­sen to book profit at this junc­ture an­tic­i­pat­ing higher vo­latil­ity in the In­dian mar­kets, the closer it is to gen­eral elec­tions.

“Ad­di­tion­ally, the cur­rency may also de­pre­ci­ate fur­ther if US Fed­eral Re­serve goes ahead and hike rates fur­ther. Hence, in­vestors would have cho­sen to book profit now than rid­ing the ex­pected vo­latil­ity go­ing ahead,” he added.

Apart from weak ru­pee and rate hike fears, sharp surge in global crude oil prices was an­other fac­tor that im­pacted in­vestors sen­ti­ments. FPIs off­loaded shares worth `5,552 crore in April and `10,060 crore in May.

While their sell­ing has sig­nif­i­cantly mod­er­ated in June till date, mar­ket par­tic­i­pants are not that much con­vinced about a change a trend re­ver­sal.

Over the last few months, cur­rency move­ment, oil prices, lack of cor­po­rate earn­ing and eco­nomic growth in In­dia have been dic­tat­ing FPI flows in In­dia.

“Go­ing ahead we will be en­ter­ing elec­tion sea­son, which could add fair bit of vo­latil­ity in the mar­kets. FPI’s will also be fo­cus­ing on the progress of mon­soon which is essential to gauge how in­fla­tion could pan out,” said Mr Sri­vas­tava.

The mov­ing out of longterm money from the coun­try is def­i­nitely a con­cern­ing fac­tor but not un­ex­pected. — HI­MAN­SHU SRI­VAS­TAVA, se­nior re­search an­a­lyst, Morn­ingstar In­vest­ment Ad­viser In­dia.

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