Trump fears: Foreign investors cut India holding by over R 12,000 crore

The increased probability of US Presidential nominee Donald Trump winning the election is beginning to impact emerging markets. Foreign institutional investors (FIIs) have dumped over Rs 12,200 crore worth of holdings in the Indian stock markets over the past two weeks. 

Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services  said, "Firm PMI and Auto sales numbers lifted stocks mid-day, but with no signs of FIIs reversing their selling spree which has now lasted for almost three weeks, and with European markets turning lower, Indian markets gave away the initial gains."

K Sandeep Nayak, ED & CEO- Centrum Broking said, "Reasons we see behind such a move are (a) profit booking given the rise in the Indian equity markets in the last few months (b) reducing exposure in emerging markets before the upcoming US elections and the impending rate hike by the US Fed which is expected by December.

Kavita Chacko, Economist, CARE Ratings said, "The FII outflows can be attributed to the growing global uncertainties and increasing market caution ahead of key global events viz.  the US Presidential elections and the anticipated US Fed Rate hike before year end, that might have prompted profit booking in Indian investments. The stronger US dollar and the subdued domestic market environment has  also been a contributing factor."
 
James added, "The global sentiment is weak and the FIIs are net sellers in the market ahead the FOMC, BoE and BoJ meet ahead. Investors are also waiting for US Q3 GDP data today to get more sense on the market’s future direction."

In October this year, FIIs withdrew Rs 4306 crore in equity and Rs 6000 crore in Indian debt market. 

Although May, June and August months this year saw FIIs pulling out their money from India's debt markets, October was the first month in the current fiscal where they took out money from equity markets. 

This comes as alarm bells as Indian markets are among the favorite investment destination for foreign institutional investors (FIIs). As per a poll conducted by Bank of America Merrill Lynch (BofA-ML), India was the most favourite equity market for the global investors for the year 2015, at 43%, followed by China at 26%, India Brand Equity Research reported.

On November 1, FIIs sold total Rs 1973 crore – Rs 868 crore in equity and Rs 1105 crore in debt.

FII investment in the year 2015-16 stood at negative Rs 18,176 crore, while in 2014-15 it was positive at Rs 2,77,461 crore, highest in over two decades.