Indian financial stocks experienced a significant outflow of nearly $1.8 billion in the first half of August as foreign investors sought safe-haven assets amid global market volatility. According to data from National Securities Depository Ltd, overseas funds withdrew $1.76 billion from August 1 to August 15.
This outflow is part of a larger trend of hot money rushing in and out of Indian financial services stocks this year. Foreign institutions have sold over $1 billion in four months, but also bought over $1 billion in June.
The global turmoil, triggered by the unwinding of the yen carry trade and weak US economic data, led to a cautious approach among foreign investors. They turned to defensive stocks in healthcare, consumer goods, and power, among others.
Indian healthcare stocks saw the most significant inflow at $412 million, followed by fast-moving consumer goods stocks at $213 million. Power companies attracted $139 million, with telecommunications, textiles, and utilities also seeing inflows.
Experts attribute the outflows to a combination of global and domestic factors, including concerns about a potential global recession, slowing economic growth, and ongoing geopolitical conflicts. Mixed quarterly earnings and relatively higher valuations have also made Indian equities less attractive.
However, domestic investors have bought stocks worth nearly Rs 31,500 crore, offsetting the foreign outflows. Analysts note that domestic flows have been strong, preventing the markets from becoming cheaper despite the volatility in foreign investor flows.
