Foreign portfolio investors (FPI) turned out to be net sellers for second month in a row by taking out nearly Rs 1,730 crore from Indian markets in May as second wave of the coronavirus pandemic spooked investor sentiment.
In April, the total net outflow from the Indian capital markets (both equity and debt) stood at Rs 9,435 crore.
According to depositories data, overseas investors withdrew Rs 3,375.2 crore from equities but invested Rs 1,645.8 crore in the debt segment between May 1 and May 28. This took the total net outflow to Rs 1,729.4 crore.
However, Morningstar India Associate Director (Manager Research) Himanshu Srivastava said the FPI flows into the Indian equity markets have been showing signs of stabilisation over the past two weeks, after witnessing a significant net outflows for eight weeks in a row.
Kotak Securities Executive Vice-President (Equity Technical Research) Shrikant Chouhan said most emerging and Asian markets have seen FPI outflows this month to date.
"South Korea and Taiwan saw the highest month-to-date FPI outflows of USD 8.5 billion and USD 3.13 billion, respectively.
"On the contrary, Indonesia saw month-to-date FPI inflows of USD 103 million. Notably, concerns of rising inflation and rising debt levels are keeping emerging markets suppressed," he added.
Falling coronavirus cases in India and signs of improvement in the overall situation is a positive sign, said Srivastava.
Also, waning concerns of any severe impact of the second wave of the pandemic on the economy would help foreign investors get their confidence back on Indian equities, he further added.
Mass vaccination in India remains a challenge which will not be solved immediately, said Groww co-founder and Chief Operating Officer Harsh Jain.
After August, when greater doses of vaccines become available in India, the number of those vaccinated may be expected to climb steadily leading to easing of restrictions of all kinds, he said.