According to latest depositories data, FPIs pulled out a net Rs 61,973 crore from equities and Rs 56,211 crore from the bond market in March, taking the cumulative net outflow to Rs 1,18,184 crore.
The outflow of funds in March comes after six consecutive months of investment by FPIs since September 2019.
This is also the highest withdrawal ever since the FPI data has been made available by the National Securities Depository Ltd.
Besides, in just two trading sessions of April, FPIs have withdrawn a net sum of Rs 6,735 crore from the domestic markets. Out of this, Rs 3,802 crore were pulled out from equities and Rs 2,933 crore from the debt segment.
"The sell-off in March is mostly driven by quant funds, hedge funds, and risk parity funds," Harsh Jain, co-founder and COO at Groww said.
Terming the fund outflow as "unparalleled", Himanshu Srivastava, senior analyst manager research, Morningstar India, said that with fear over the degree of impact that Covid-19 could leave on the global economy, foreign investors stormed out of the emerging markets, with India among the worst hit.
"The intensity of the situation could be gauged from the fact that even during the financial crisis of 2008, FPIs sold net assets worth USD 9.3 billion in the Indian markets while in March 2020, they have been net sellers to the tune of USD 16.5 billion," he added.
Regarding the future of FPI flows, Srivastava said these are unprecedented scenarios and with risk-taking going off the table, emerging markets like India may most likely witness a prolonged period of net outflows till the time situation on the coronavirus front stabilizes.
Jain said: "RBI raised the limit FPIs can invest in corporate bonds to 15 per cent on March 30th. While this is encouraging, it is unlikely to drive investments immediately. The government's plan for easing out the lockdown after 15th April and other boosts like economic aid is crucial at this point in time." SRS BAL ABMABM