Too early to say $11-bn FPI outflow was due to demonetisation: Sinha

IT WOULD be “too early” to conclude that the huge amount of outflow of foreign portfolio investment from India during the third quarter of this financial year was mainly due to the government’s demonetisation move as during the same time important global developments like announcements of US presidential election result and the US Federal Reserve interest rates hike took place, according to Sebi chairman U K Sinha.

Speaking at an interactive session of Bharat Chamber of Commerce on Tuesday, Sinha informed that foreign portfolio investors (FPIS) pulled out a massive $11 billion from the country’s capital market during the December quarter. He said it would take some time to assess the extent of the demonetisation impact on this.

“There is no hard data on this. Data will be available only after 3-4 months. But, on the day of the decision (of demonetising high value currency notes), the same day US presidential result came out. That had an impact not only on India but other parts of the world. It is too early to analyse and say that it has gone out because of cancellation of legal tender. Besides, there was the first rate rise in the US as the Fed enhanced the rates,” Sinha said.

“…There is a feeling among investors across the world that USD will strengthen and money from other parts of the world will go there. What per cent is because of the cancellation (of the legal tender of old Rs 500 and Rs 1,000 notes) and what per cent is because of US elections will be analysed, but it would take some time,” he said. FE