After the PNB fraud has created a turmoil amongst the global cues, the foreign investors have pulled out Rs. 10,000 Crore from the Indian stock market till date. This has not gone down well with the total inflow by the foreign portfolio investors of Rs. 13,780 Crore in January as per the data in the depositories. The head of Geojit Financial Services Research department Vinod Nair states that the news of the global crude oil prices to have an adverse impact on the fiscal deficit too has made the market careful. On 14th February, PNB had disclosed a fraud worth of Rs. 11,400 Crore involving Nirav Modi and MehulChoksi, the jewelers.
FPIs withdrew an amount of Rs. 9,899 Crore from the equities between 1st to 23rd February as per the depositories data. However, during the period under review, they had put in more than Rs. 1500 Crore. The US employment rate was at its lowest in 17 years i.e. 4.1 percent in January. There is also a possible rise in the inflation rate. As a result of all this, the FPI took back its investment from the Indian markets. The budget announcement to tax the long-term capital gains and bringing FPIs into the local compliance are some of the reasons why the FPIs would want some profits in their stride. Therefore, pulling out its money from India will rather be a short-term job since India is one of the best and most sought-after destinations for the FPI to put in its investments.
The 10-year bond yield of India cross 7.5 percent for the first time in July 2016 and same is the case with the 10-year treasury yield. Also, when the arbitrage between the selling debt and buying equity will squeeze, it will lead to an inflow in the debt market.