The sell-off by overseas investors took place during a month of troubled Indian financial markets. The Bombay Stock Exchange's Sensex index fell 23% in March to its lowest level since 2017, while the rupee fell to Record low Over $ 76 for $ 1
Data from Indian securities depositories show that in March, foreign investors sold 620 billion rupees ($ 8.2 billion) of shares and 603 billion rupees of bonds. The outflow this month is larger than the outflow in 2008, the year of the global financial crisis. On Wednesday, Sensex fell another 4%.
Investors sold Indian companies as part of a wider rout in emerging markets, including South Korea and Taiwan. As the coronavirus pandemic spread, markets in the United States and Europe also plummeted, shutting down the global economy.
But the country has suffered the worst economic slowdown in the years before the virus attack, which has deepened concerns in India. GDP growth is expected to fall to Ten years low For the year ending March 2020.
After a slow start, the spread of Covid-19 has accelerated in recent weeks. As of Wednesday, the number of confirmed infections has risen to more than 1,200. Prime Minister Narendra Modi announced a 21-day strict curfew last week, stating that all but the essential businesses will be closed and people will stay at home.
About 70% of India's economic activity can stop According to Société Générale. Last week, Moody's cut its forecast for India's 2020 economic growth in half to 2.5%.
Analysts say the crisis will have a serious impact on company earnings. Automakers that are already under pressure to sell are now at risk of being hit again by demand.
The pandemic could also spread to India's tense financial system, where banks already struggling to clean up their loan books face a sharp rise in default rates. After the transaction, investors have been in an advantageous position Approaching crash The headquarters of a large private bank in March.
Corona virus business update
How does coronavirus harm markets, businesses, and our daily lives and workplaces? Keep up with our Coronavirus Newsletter.
Rusmik Oza, head of basic research at brokerage company Kotak Securities, said foreign investors have accumulated a lot of Indian assets. This has made India's financial markets more vulnerable to the global economic shocks that led to large capital outflows, such as the 2008 financial crisis.
"Their shareholding is too high. This may be (worrying)," he said. "If things get worse on a global scale, even marginal sales could cause a lot of damage to the Indian market."