India Sees Highest FII Outflows in Asia During January

30 Jan 2024 , 07:06 AM

In January, foreign institutional investors (FIIs) withdrew $2.62 billion from Indian exchanges, resulting in the largest outflows from Asian equities markets. Since January 2023, this month’s outflow has been the greatest.

The Nifty increased by 0.05% in January, while the Sensex fell by 0.4%. Losses were also sustained by other Asian nations: the Hang Seng plummeted 5.8%, Shanghai plunged 4.3%, the Kospi dropped 9%, and Jakarta dropped 4.2%. In the meantime, the Nikkei gained 2.6% and the Topix index increased by 2%.

This month, there were $6 million in outflows from Sri Lanka, excluding India. But there were inflows into other Asian nations. At $12.28 billion, Japan accounted for the largest stock inflows; South Korea and Taiwan came in second and third, respectively, with $2.23 and $1.72 billion.

Thailand received about $803.4 million, Indonesia about $407 million, Malaysia about $92 million, the Philippines about $85.2 million, and Vietnam about $45 million in inflows. The data on China’s foreign fund flow is out of date. A recent estimate from Kotak states that in December 2023, China saw $10.8 billion in inflows.

As per reports, the performance of HDFC Bank in particular was what sparked FII selling in India. In addition, FIIs booked profits in the Indian markets as a result of the increase in US Treasury yields. Reports went on to say that the Middle East crisis and its effects on inflation and global economy have caused market volatility worldwide.

The next meeting of the US Federal Open Market Committee (FOMC) is being watched closely by the world on January 30-31, 2024. Neeraj Gaurh, fund manager at Axis Securities, PMS, stated that although it is anticipated that there won’t be a rate drop, the emphasis is on the remark as the macroeconomic data suggests improvement.

Regarding the Indian economy, analysts anticipate stable finances and steady expansion. A constant cost of borrowing and moderate inflation are anticipated in the outlook. The government is urged to strike a careful balance between growth and the fiscal deficit through government capital expenditures (capex) despite having limited fiscal space. While exhilaration surrounds new market highs, analysts warn against possible geopolitical threats. They stress that the main factor driving the markets will be earnings growth rather than price re-rating.

Recent news reports claimed that foreign institutional investors (FIIs) in India are selling to comply with SEBI’s improved disclosure standards, which are designed to stop manipulation of the minimum public shareholding (MPS) regulations and to prevent foreign organisations from indirectly controlling Indian companies through shell companies. Nevertheless, some news stories also hinted that SEBI’s consultation document may have requested for more specific information about beneficial ownership from FIIs than it really did.

To safeguard investors against any violations of MPS regulations, SEBI required supplementary disclosures in 2023 for FIIs having more than Rs 25,000 crore in AUM in Indian markets or more than 50% of their Indian equity AUM (assets under management) in a single corporate group.

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