New Delhi:
Foreign portfolio investors (FPIs) began the year with profit booking as they withdrew a net sum of Rs 2,418 crore from the Indian capital markets in the first three trading sessions of January.
As per latest depositories data, Rs 524.91 crore was pulled out of equities and Rs 1,893.66 crore from the debt segment between January 1-3. This resulted into a cumulative net outflow of Rs 2,418.57 crore.
In 2019, FPIs invested a net sum of Rs 73,276.63 crore in the domestic markets (both equity and debt). Barring January, July and August, FPIs were net buyers for rest of the months in the year gone by.
Umesh Mehta, head of research at Samco Securities said that "given the massive rally of previous year, FPIs have started booking profits in 2020. It is likely that they are building up their war-chest to enable buying in huge quantities just before the Budget in February."
Himanshu Srivastava, senior analyst manager research at Morningstar Investment Adviser India, said "there was an apparent cautiousness" among FPIs.
This could be attributed to some of the negative trends such as political issues in India, re-emergence of trade war between US and China and continuing slowdown in the Indian economy. Besides, year-end profit booking by FPIs could also be one of the factors for relatively low net inflow, he added.
Ajit Mishra, VP research at Religare Broking Ltd, said, "FPIs were net sellers as they booked profits at higher levels. Going forward, if geopolitical tension between US-Iran escalates further, it could restrict FPI flows."
However, in the long term, FPIs remain confident about the Indian markets as they are anticipating positive measures and reforms would continue to aid economic recovery, Mishra added.
Geopolitical developments in the Middle East would the major driving factor for the Indian equity indices this week and will also have a bearing on crude oil prices and rupee movement, analysts said.
Global markets were thrown into fresh turmoil on Friday after top Iranian commander Qasem Soleimani was killed in a US drone strike in Iraq, marking a dangerous escalation in tensions in the volatile region.
World leaders reacted to the killing with alarm, even as Iran vowed "severe revenge".
Hardening his stance, US President Donald Trump on Saturday warned Tehran that the America will hit Iran "harder than they have ever been hit before" if it carried out retaliatory attacks.
"In near term, markets could be volatile going ahead due to risk of possible retaliation from Iran. On the positive side, markets would be looking ahead for signing of the phase 1 of the US-China trade deal along with the December quarterly results and developments prior to the Union Budget which might keep the momentum intact," said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
Meanwhile,six of India’s 10 most-valued companies together lost Rs 26,624.10 crore in market valuation last week, with ICICI Bank hurting the most.
Reliance Industries Limited (RIL), HDFC Bank, Hindustan Unilever Limited (HUL), Kotak Mahindra Bank and State Bank of India were other blue chips that saw a drop in their market capitalisation (m-cap) for the week ended Friday, while Tata Consultancy Services, HDFC, Infosys and ITC ended in the green.