Will Indian markets spook FIIs?

FIIS BOUGHT SHARES WORTH $868.37 MN IN NOV, WITH OIL PRICES CORRECTING OVER 20% SINCE OCT. HOWEVER, FIIS SOLD SHARES WORTH $31.67 MN IN DEC

MUMBAI: Foreign capital inflows into Indian equities may be at risk following Urjit Patel’s surprise move to resign as the Reserve Bank of India (RBI) governor on Monday, after market closing.

Foreign institutional investors (FIIs) may continue to dump Indian shares, which made a comeback last month, according to analysts. FIIs bought Indian shares worth $868.37 million in November, with crude prices correcting over 20% since October. However, FIIs sold shares worth $31.67 million in December. In 2018, they have been net sellers of Indian shares worth $4,921.45 million. “RBI governor Urjit Patel’s resignation is unfortunate, but I am sure the government will soon find a successor. If it is beyond personal reason, as cited by him, it will be a bit of a worry for both global and foreign investors, as to why the government and an institution like the RBI can’t work together,” said an equity analyst, requesting anonymity.

Domestic institutional investors (DIIs) have also been on the edge in the past two months with uncertainties around state elections and crude prices looming large. DIIs, including mutual funds and insurance companies, which have pumped in hefty amounts in equities despite the turbulence, were net sellers in December so far. They have bought Indian shares worth only ₹800.30 crore in November and sold ₹ 2,266.64 crore in December. However, in 2018 DIIs have bought shares ₹1.06 lakh crore.

Net inflows into domestic equity mutual funds fell 33.33% to ₹8,414 crore in November from the previous month, the lowest since August, according to the Association of Mutual Funds of India data.

However, VK Vijayakumar, chief investment strategist, Geojit Financial Services, said once the critical issues die down markets will stabilize. “The market is presently being impacted by the global sell-off and domestic political concerns. Once these issues die down, the market will stabilize. The resignation of the RBI governor is a short-term sentimental negative. However, this is not likely to impact the economy and the market beyond the very short term, provided we get a good reputed person as a replacement,” Vijayakumar said.