NEW DELHI: Foreign investors have been pulling out of India, says a recent US Congressional Research Service report on Covid-19’s effects on the global economy. “Foreign investors have pulled $26 billion out of developing Asian economies and $16 billion out of India, increasing concerns of a major economic recession in Asia,” it noted.
This is corroborated by data from Indian bourses. Foreign portfolio investors have been pulling out of India since January and by March, their panic-selling brought foreign institutional ownership of the top 500 BSE-listed Indian companies to a six-year low.As on March 30, FII ownership of BSE 500 companies came down drastically to 12.3%. In all, FIIs were net sellers of equity worth Rs 83,859 crore this quarter.
“FII selling continued in April when they were net sellers of stock worth Rs 5,208 crore. In times of high risk, it is natural for funds to flee emerging markets and go for safer havens such as US treasury bonds, gold etc,” said Amit Banerjee, an independent merchant banker.
Analysts fear future FDI inflows would be hit. “There are question marks on future FDI inflows. Despite improving on ease of doing business index, most foreign investors will play safe and conserve funds at this time,” said Prof Biswajit Dhar, JNU.
Other analysts believe the Indian economy could attract longer term funds as well as FDI. Management consultancy firm Kearney said Wednesday that India holds an investment opportunity of $575 billion in the transport infrastructure sector. “Roads and railways constitute 80% of the total investment opportunity driven by investments in flagship projects such as Bharatmala Pariyojana, dedicated freight corridor, high speed rail, etc,” it said.