March wasn’t a conducive month for stock investors in the country due to COVID-19. While investors back home resorted to massive sell-off to safeguard their wealth, foreign investors followed suit. Combined, domestic investors lost Rs 33.38 lakh crore during the month, which was, by far, the worst instance since the global financial crisis of 2008. Thankfully, markets recovered in Apr by rallying 14%, curtsy attractive valuations, positive global cues, and economic stimulus package announced by the government. This added Rs 15.92 lakh crore to investor wealth and wiped half of the losses incurred in Mar.
Even so, not everything was jolly in the land of stock markets. Despite the 14% rally, massive outflow of foreign money from markets was a concern. As per the National Securities Depository Ltd (NSDL), foreign investors ploughed back their investments from as many as 24 sectors out of 35. Out of the remaining, only 8 sectors received foreign money while 3 were untouched. In all, foreign institutional investors offloaded investments of Rs 5,208.50 crore from the cash segment. Why this exodus of foreign investors from India, an emerging market that usually attracts overseas investments?
Well, at the heart of the matter was coronavirus (COVID-19), which wiped a massive chunk of investor wealth across the globe. To add to this, INR fell to its lowest levels on 16th Apr and settled at Rs 76.87 per USD—a 5.7% decline from the level of 2nd Mar. Not to forget, Franklin Templeton India that wound up 6 of its debt funds. These events precisely drove foreign investors out, even as stock markets registered a gain of 14%. The burn was especially felt by the Other Financial Services sector, which includes financial institutions other than a bank. Alongside was the Pharmaceuticals & Biotechnology sector, which lost significant funds despite being the top performer so far in 2020. Now, it is for us to see how the revised FDI policy will affect the movement of foreign money in the domestic markets.