The year 2016 started on a weak note for the Indian equity markets and they fell in line with the global markets primarily driven by outflow from foreign institutional investors. The FIIs pulled out a net of Rs 11,126 crore from Indian equities during the month – the biggest outflow in the first month of the year since seen in January 2008 – following which, the benchmark Sensex at the Bombay Stock Exchange fell 4.8 per cent to close at 24,870.
The outflow of funds that picked pace in December 2015 in anticipation of the rate hike decision by the Federal Reserve in the US, gained momentum in January following a sharp fall in Chinese markets and further decline in crude oil prices. Decline in commodity and crude oil prices have raised concerns over growth in China and global growth rate.
While markets across the world remained under stress during the month, Indian market was among the ones that fell the least. The Sensex fell 4.8 per cent even as the Shanghai Composite in China fell 22.6 per cent during the month and the Hang Seng in Hong Kong fell 10.2 per cent. The other big losers include Dax in Germany and Nikkei in Japan as they fell 8.8 per cent and 8 per cent, respectively.
The fall in markets however was seen as investment opportunity by domestic investors and the domestic institutional investors invested a net of Rs 12,874 crore during the month. Experts say that DII investment in January provided the counterbalance to FII outflow thereby arresting the fall at bourses in India.
While India Inc continued to deliver weak revenue growth for the quarter ended December 2015, market analysts say that a revival in earnings growth will provide the push to the Indian markets going forward.
The FII sentiment though remained weak and the opening month of the year was the worst in last eight years. It was in January 2008 that the outflow was more than that seen in January this year as they pulled out a net of Rs 13,035 crore in January 2008.
The outflow from FIIs also resulted into weakness in rupee that fell below the 68 mark against the dollar during the month. It however closed at 67.78 against the dollar on January 29.