March sees India's biggest monthly defeat for foreign investors

MUMBAI: Markets are set to witness the biggest sell-off of foreign investors in a single month in March, as a 21-day national blockade to curb the spread of the coronavirus raised fears of a devastating impact on an already slowing economy. .

() It sold nearly $ 16 billion in equity and debt as of Monday, according to deposit data, even as Prime Minister Narendra Modi's government announced economic relief targeting the poor and regulators relaxed compliance rules.

With a drop of nearly 30% in the quarter ending in March, India's top indices posted their worst annual performance since 2009 and the volatility index shot up to levels last seen during the 2008 financial crisis.

The sale by foreign investors is causing panic in the markets, while domestic investors are net buyers, said Akhil Chaturvedi, head of sales at brokerage Motilal Oswal.

But these are the same FIIs that will boost the market again because global economies are full of liquidity as interest rates are falling.

Closed auto factories and empty hotels and airports are expected to exacerbate India's economic woes, after lackluster demand and a credit crisis that has already brought growth to its slowest pace in six years.

Indian coronavirus cases rose to more than 1,200 on Tuesday, 32 of which died, according to the health ministry.

Last week, the government announced a $ 23 billion stimulus to provide direct cash transfers and food delivery to the poor, while the central bank cut its key policy rate by 75 basis points (bp) along with other measures. to increase liquidity.

Although the government package addresses some of the basic problems, it pales in comparison to the scale of the problem, analysts at Emkay Global said Monday. He estimated that the blockade would reduce approximately Rs 2.3 lakh crore of India's GDP (gross domestic product) each week.

The Reserve Bank of India's measures are also expected to hurt bank margins and deposit rates, even if the economic impact of the virus is expected to worsen its asset quality, according to several analysts.

Foreign investors fled from that more. In the two weeks ending March 15, the FIIs sold a whopping $ 1.6 billion in financial services stocks that include banks and non-bank financial companies.

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