Capital Outflow from Indian markets in Nov at $ 5 Bn

Even as every Indian is busy adjusting himself or herself to the new monetary system, where the old Rs 500 & Rs 1000 notes have been banned in a move to curb the use of unaccounted money, the foreign investors seem to have a valid reason to book out of the fastest growing developing economy in the world.

FPIs seem to have smartly booked profits in both the equity markets and debt markets as is reflected in their steady sales figures. In November alone the capital outflow has been $5 billion which is remarkable. The equity markets even though have fallen by almost 9 per cent from their recent highs on September 8, they haven’t really panicked due to FPI’s selling their stakes as the Domestic Institutional Investors (DIIs) have been steadily buying into the markets.

FPIs sold between June-July 2013 to the tune of $10.5 billion followed by selling another $2.5 billion dollars. Markets reacted positively after such heavy selling in 2013.

In current scenario it is widely believed by experts that demonetisation will have an impact on GDP growth and the situation on monetary front has created uncertainty in bond markets also, triggering a booking of profits in the same instrument by FPIs.