There was net outflow of $7.2 billion from the Indian market in June of which $5.4 billion was from debt market triggered by global risk aversion and currency weakness, Deutsche Bank India Equity Strategy report said.
The equity outflows from other emerging Asia markets like South Korea, Taiwan, Indonesia and Thailand was between $2 billion and $4.5 billion, the report said, adding India still remains the primary recipient of FII flows into emerging Asia.
The report also pointed out that the Indian equities which went down 1.8 per cent in June driven by a generic risk-off induced by QE-taper worries outperformed most emerging market peers like China (-14 per cent during June), Brazil (-11 per cent), S Korea (-7 per cent) and S Africa (-6 per cent). Russia (-1.5 per cent) was the only key emerging market to outperform India, the report said.
Among sectors, realty (-10 per cent), metals (-9 per cent), power (-8 per cent) and banks (-7 per cent) suffered the most due to risk-off sentiment, while IT services ( 3.1 per cent) and oil and gas ( 2.8 per cent) were key outperformers due to rupee weakness and policy action.
Despite the out performance, high current account deficit and declining capital inflows render Indian equities susceptible to external shocks even as it is one of the key emerging market economies likely to witness overall macro improvement in the medium term, it said.
India's debt market witnessed one of the severest bouts of foreign investor outflow, as FIIs withdrew $5.4 billion in June, the report pointed out. "India's debt market witnessed one of the severest bouts of foreign investor outflow at $5.2 billion in June, taking YTD flows into negative territory at $1.1 billion. This, coupled with recent outflows from equities, moderated the positives emanating from nascent improvements in current account deficit," the report said.
