India could see a sharp fall in foreign portfolio investments in its stock markets and exports getting hurt in the coming year in the wake of the steep fall in crude oil prices.
“While lower oil prices would definitely lower the import bill, given that weaker global demand is a driver of cheaper oil, India’s exports are likely to get hurt as well (and they are). Further, as surpluses in capital exporting economies (like oil producers) are eroded, capital flows could get constrained as well, as those economies have less capital to invest abroad,” Neelkanth Mishra, managing director of Credit Suisse said.
Foreign investors invested Rs 2,18,512 crore ($ 35.8 billion), including debt and equity, during the January-October period this year. Equity markets got Rs 82,266 crore (around $ 13.48 billion) while the balance went to the debt market. In fact, a major reason for the Sensex rally this year has been heavy FII inflows. FII inflows are likely to halve next year as sovereign wealth funds, backed by oil exporting countries, are likely to cut down their funds for such investments, it said.