CHENNAI (TIP): Foreign institutional investors (FIIs) have not logged out of equity markets in a big way after ‘Brexit’. But their investments in the stock markets stands at only around $3 billion (19,238 crore) so far in 2016 (till June 28) on a net basis, the lowest for a six-month period in five years.
Net investments by FIIs in the Indian markets has plunged about 51% on a year-on-year basis during the period. FIIs are exiting stocks of healthcare companies, a defensive bet and a traditional favorite, in a big way. They are also showing little interest in financial services firms, which include banks, following the increase in stressed assets and tepid growth.
The benchmark Sensex and the broad-based Nifty have advanced by only 1.6% and 2.3% respectively so far in 2016 as both overseas and domestic investors are not showing much appetite for equities. “There is a lot of uncertainty. FIIs are sitting on the sidelines as the expected uptick in corporate earnings did not happen and there is no clarity on Fed rate hikes,” says G Chokkalingam, founder and managing director, Equinomics Research and Advisory.
“Most of the money is coming through ETFs (exchange traded funds that are passive investment vehicles),” says Deven R Choksey, MD, KR Choskey Shares and Securities. “The churn in the portfolio has also been quite high,” he says.
After investing nearly $3 billion in healthcare companies in 2015, overseas investors turned negative on the sector selling stocks to the tune of $392 million till the end of May. Healthcare firms accounted for substantial chunk of net FII inflows into stock markets in 2015 with their investments in the sector jumping nearly ten-fold in value terms during the year.
Despite fears over possible flight of capital, overseas investors have pulled out a mere 418 crore after the Brexit announcement from the Indian stock markets. The markets have also not taken a hit after the initial plunge.
Experts believe that the markets would now take cues from the progress of the monsoon. “Brexit and Rexit are not risks. Only the exit of the monsoon is a risk,” Chokkalingam quips.
After betting big on the Indian markets in the first half of 2015, FIIs exited stocks in the latter half with their net investments coming at just 17,808 crore for the entire year. Overseas investors turned bullish on Indian markets only from March this year.