FPI outflow from debt markets at Rs 17,000 crore in December so far

Foreign investors have pulled out over Rs 17,000 crore from debt markets in this month so far mainly due to rally in government securities and decreasing spread in interest rates between the US and India. However, FPIs pumped in a net Rs 138 crore in equity markets in the month so far.

The latest outflows come following net withdrawal of more than Rs 27,000 crore from debt markets and another Rs 22,500 crore from equities in the preceding two months (October-November). "In the debt market, FPIs have been net sellers in seven out of 11 months thus far. The rally in the Indian government securities and the decreasing spread between US interest rates and India could be a reason; FPIs book profits in the gilt rally in India," FundsIndia.com Head of Mutual Fund Research Vidya Bala said. Net withdrawal by FPIs from debt markets stood at Rs 17,392 crore in this month, while they poured in Rs 138 crore during the period under review, according to data available with depositories.

The pullout by FPIs started in October 2016 from equities following uncertainty over US election results and was felt across emerging markets. "This was further aggravated in November due to several factors,  the uncertainty over US ties with the emerging markets post Trump victory, the near-term impact on corporate earnings, and economic growth from demonetization in the near term and impact of GST on companies' cash flows," she added.

This year so far, FPIs have invested a net sum of Rs 28,881 crore in stocks while they pulled out Rs 42,101 crore from the debt market, resulting in total net outflow of Rs 13,220 crore.