FPIs pull out Rs 3,000 crore from equities in 3 trading sessions of October
The outflow in October is on "account of fears of a global recession, trade war and a slowdown in India. FPI inflow is expected to improve on expectations of good corporate earnings in third quarter, but is likely to remain muted due to global economic and trade war concerns. The market shall be supported by domestic investors, " Arun Mantri, senior manager at Karvy Stock Broking said
Foreign portfolio investors have offloaded equities worth around Rs 3,000 crore in just three trading sessions of October amid fears of global recession and trade war.
This follows a net investment of around Rs 7,850 crore by foreign portfolio investors (FPI) into equities in September.
Market experts, however, believe that FPI inflows are expected to pick up after the rate cut by the Reserve Bank of India (RBI) and several decisions taken by the capital markets regulator Securities and Exchange Board of India (Sebi).
The central bank on Friday cut benchmark repo rate by 25 basis points to 5.15 per cent. The interest rates cut is for a record fifth straight time to almost a decade low.
According to the depositories data, overseas investors pulled out Rs 2,947 crore from equities and Rs 977 crore from debt segment on a net basis. This resulted into a total net outflow of Rs 3,924 crore from the Indian capital markets during October 1-4.
Markets were closed on October 2 on account of Gandhi Jayanti.
In the last week of September, the government slashed corporate tax rate by around 10 percentage points and also clarified that the enhanced tax surcharge will not apply on capital gains arising from sale of any security, including derivatives, in the hands of FPIs.
Besides, Sebi has simplified know-your-customer (KYC) requirements for FPIs and granted them permission to carry out off-market transfer of securities.
The outflow in October is on "account of fears of a global recession, trade war and a slowdown in India. FPI inflow is expected to improve on expectations of good corporate earnings in third quarter, but is likely to remain muted due to global economic and trade war concerns. The market shall be supported by domestic investors, " Arun Mantri, senior manager at Karvy Stock Broking said.
However, interest rate cut by Reserve Bank of India (RBI) is good for growth and should result in higher foreign inflows, he added.
Commenting on the future outlook of FPI flows, Alok Aggarwala, head research and advisory at Bajaj Capital, said "it will be influenced by how the economy performs and how soon corporate earnings recover. The US Fed's monetary stance and global liquidity will also be crucial in determining FPI flows".
Seven of top 10 companies lose over Rs 1 trillion in m-cap last week
Seven of the 10 most valued domestic companies suffered a combined erosion of Rs 1 trillion in their market valuation last week with HDFC Bank taking the biggest hit by losing over Rs 30,000 crore.
Besides HDFC Bank, the other losers included Reliance Industries (RIL), Hindustan Unilever (HUL), HDFC, Kotak Mahindra Bank, ICICI Bank and Bajaj Finance.
On the other hand, Tata Consultancy Services (TCS), Infosys and ITC are among the top 10 firms that saw rise in their market valuation for the week ended Friday.
Market capitalisation (m-cap) of HDFC Bank dropped the most by Rs 30,198.62 crore to Rs 6,50,446.47 crore.
ICICI Bank's market value slid by Rs 22,866.93 crore to Rs 2,67,265.32 crore and Kotak Mahindra Bank tumbled by Rs 15,624.6 crore to Rs 2,98,413.27 crore.
Similarly, market valuation of HUL tanked by Rs 14,287.76 crore to Rs 4,20,774.52 crore, while HDFC lost Rs 10,178.84 crore from its m-cap, standing at Rs 3,41,349.33 crore.
Besides, Bajaj Finance dropped by Rs 9,437.91 crore to Rs 2,26,309.37 crore and the valuation of RIL stood at Rs 8,28,808.67 crore, a loss of Rs 824.08 crore.
In contrast, valuation of TCS jumped Rs 8,236.49 crore to Rs 7,79,989.45 crore and that of Infosys rose Rs 4,681.59 crore to Rs 3,40,704.24 crore.
The m-cap of ITC advanced Rs 5,344.62 crore to Rs 3,16,069.96 crore.
In terms of ranking of top-10 firms, RIL retained its top position, followed by TCS, HDFC Bank, HUL, HDFC, Infosys, ITC, Kotak Mahindra Bank, ICICI Bank and Bajaj Finance, which pipped State Bank of India to acquire the tenth position.
During the week, Sensex plummeted 1,149.26 points or 2.96 per cent, while Nifty declined 337.65 points or 2.93 per cent.