A favourite of foreign investors for many years, Indian equities seem to have lost the plot this year as the net inflows of the so-called ‘hot money’ or foreign portfolio investments dipped below USD 3 billion.
This marks a sharp decline from an average USD 20 billion invested by the Foreign Portfolio Investors (FPIs) into Indian stocks in each of the last three years.
In contrast, the debt market kept overseas institutional investors captivated with its relatively steadier return promise and attracted net inflows in the excess of Rs 50,000 crore (well above USD 8 billion) this year.
With a couple of weeks still left before curtains are drawn on 2015, the experts believe the final tally for the equities may be even worse as foreign investors have lately been on a selling spree.
This can make 2015 the worst year for Indian equities in terms of the overseas inflows since 2011, when FPIs pulled out Rs 2,714 crore from the stock markets. Nonetheless, going by the current trend, it is likely that 2015 would be remembered as the fourth consecutive year of net FPI inflows into stocks.
Fears of a global slowdown and an imminent interest rate hike by the US Federal Reserve have spooked foreign investors away from riskier assets, while the delay in implementation of major economic reforms could also have made the Indian markets less attractive for them, analysts said.