Foreign portfolio investors (FPIs) have pulled out more than Rs 4,000 crore from the Indian capital markets so far in January, indicating their cautious approach. According to data available with the depositories, FPIs withdrew a net amount of Rs 3,987 crore from equities and a net sum of Rs 53 crore from the debt market, taking the total outflow to Rs 4,040 crore during January 1-18. FPIs had invested a collective net inflow of over Rs 17,000 crore in the Indian equity and debt markets during November and December while pulling out a staggering Rs 38,905 crore in October.
Global brokerage firm, Bank of America Merrill Lynch (BofAML), cautioned investors to stay away from equities in 2019 which may witness market volatility ahead of the general elections in the country. The foreign brokerage advised the investors to invest their money in bonds. The brokerage has set a Nifty target of 11300 by December 2019, implying limited upside from current levels. Sanjay Mookim, the India equity strategist at the brokerage said that there could be a further significant decline in the valuation of midcap stocks.
While equities have underperformed in 2018, India’s debt market is offering lucrative investment opportunities with non-convertible debentures (NCDs) of some companies offering returns up to 10.76%. Debentures of Shriram Transport Finance, Mahindra and Mahindra Financial Services, SREI Equipment Finance and Kosamattam Finance, which are currently open for subscription, are offering returns between 9-10.76%, payable annually.
The partial shutdown of the US government, trend in crude oil prices and rupee movement may dictate the direction of the equity market in the coming week. Markets may also witness added volatility due to the expiry December series in the derivative segment. Global markets have also been jittery over reports of Donald Trump planning to sack Federal Reserve chairman Jerome Powell due to the recent interest rate hike. However, recent fall in crude oil prices, pick up in industrial production, softening of CPI inflation and the recent GST rate cut announcements may cheer up the Indian equities.