FPIs take out Rs 3,800 cr in just 7 trading days

Foreign investors pulled over Rs 3,800 crore from the Indian stock markets in the last seven trading sessions mainly on account of a global sell-off.

This comes following an inflow of over Rs 13,780 crore by foreign portfolio investors (FPIs) in January, latest data with depositories showed.

"As for the current sell-off, while domestic news of fiscal slippage and long-term capital gains are dampeners, they are unlikely to have turned disruptive.

"We believe the FPI pull out in the last few days is simply on account of a global sell-off. This comes on the back of strong wage numbers in the US and a risk of higher inflation and a consequent faster Fed rate hike," said Vidya Bala, head of mutual fund research at Fundsindia.Com.

According to the depositories data, FPIs withdrew a net amount of Rs 3,838 crore from equities in the last seven trading sessions.

However, they put in nearly Rs 4,600 crore in the debt markets during the period under review.

Explaining the reason for inflow in the debt markets, Bala said, "higher yields in the US bonds may make it more attractive for FPIs to shift their money to bonds as the arbitrage narrows between borrowing low and earning higher returns in equities."

Interestingly, strong earning numbers in India besides a fall in crude prices in the past few days, and correcting valuations make Indian markets look less expensive now, while domestic institutional investors are tapping this opportunity and have been net buyers in the Indian market in the last few days.