Rupee Under Pressure: Foreign Investors Pull Billions Out Of Indian Markets

Ajouté : 2026-05-17

[00:00:00]Yeah, I'll start with foreign portfolio uh investment and if you see the amount of money that foreign investors have taken out of India since the start of the year is 2 lakh cr rupees already more than the amount of money foreign institutional investors took out of the Indian markets in all of last year which was about 1.66 66 crores. This is been a bloodbath. Uh May, March, April, a lot of money going out of the Indian stock markets and even now we're just in the middle of May. Again, you're seeing a very strong negative here. Let me try and get Sami to explain because this is what he understands. I mean, he understands a lot of things, but this is what he's most passionate and charged up about. Is this the way it's likely to stay? Is there anything that you can do?

[00:00:42]anything you want to say to policy makers watching you Samir at this time on how this can potentially change Samir >> so before that fundamentally I disagree with Neil Gan Mishra that we should let currency weaken 200 and all that because because he's thinking that fundamentals affect prices and markets and currencies but I think it's the other way around also that if you look at George Soros's reflexivity that prices affect fundamentals if you did whatever you could to affect the stock market or even the currency fundamentals will improve.

[00:01:17]If you did whatever it took to uh improve interest rate by uh sorry currency by 1% you will save $2 billion a year because we are importing some $180 billion. So I say spend $2 billion in subsidizing the banks and let them raise $50 billion from NRIs. you will need around $2 billion a year from government's pocket because these days the interest rate differential between India and the world are low. So previously you could get away without out of pocket but if you if you have to spend say 2 3% which is on a 50 billion $1.5 billion a year for 3 years that 1.5 billion you will save in 1 minute if overall from whatever level it would have reached otherwise it is 1% better.

[00:02:04]Same thing for the stock market. Uh we all believe that means the government and the system that we should do economy right and the stock market will reflect the fundamentals. No, no, no. Stock market you target directly, it'll affect the fundamentals and this somehow we don't accept and we go out of line with the world and I think whatever it takes and you know these taxes I'm not going to say again and again because I am only one out of maybe 50,000 fi and if they can handle it I can handle it better but it is wrong and everybody knows and nobody says that it is I it is wrong but take it or leave it. We all think that every day if we say it somebody will listen.

[00:02:47]But I'm saying these are easy things to do. It is not easy to change our LLM models and our AI models and our FDI policy and nuclear policy. It is easier to give 1% extra return to the stock market and individuals like us can raise 500 million in a year.

[00:03:03]>> Let me get nil Khan Mishra to respond to everything that you're saying. Is this ringing alarm bells uh in policy circles that you travel in nil Khan or does it really not matter as much to the government because okay these are foreign investors they chase returns the rupee is depreciating uh and therefore it doesn't really matter says of course it matters the government has to believe it matters the tax measures that have been introduced in recent budgets have to be reversed because that's what will change sentiment and once the market sentiment changes it has a rollon effect on the real economy as well let Neil Kant respond to that >> yeah First let me clarify you can go and rewind and see what I said. I never said the rupee should be let to slide. Uh all I was trying to say was that one mechanism to protect the rupee from sliding further is to let oil prices rise. That was a very simple intervention. It has now gone into I'm saying it is going to 100 please that is not my >> that's what it looked like. [laughter] >> Yeah but you know anyway so to uh that clarified uh let me address the question. See I think there are um from the FI's perspective in the last two years there have been three major issues. First is that India is part of the EM basket and EM as an asset class were losing money and and 3 four years back India was the only shining em. So Korea had had a coup, China was uninvestable, uh Indonesia had issues, South Africa was struggling with power cuts, Brazil was struggling with political instability. Today uh TSMC's uh index weight is higher than that of India.

[00:04:38]U Korea is generating the two companies in Korea are generating more free cash flow than all of corporate India. Uh you have uh South Africa now with power surplus uh and and so as the EM universe has become much more attractive. Uh there's more competition. So there's a beauty parade got tougher. So the the price to earnings multiple that fi want to come in at is a lot lower than what they would have expected four years back. At the same time I think em as an asset class has started to outperform the US. So now flows have started to happen. Um at the current stage I think the concern is primarily about the the the oil prices. Once the currency market has stabilized there's still a lot of panic in the currency market. Once the currency market has stabilized, our economy is actually doing very well. Uh in March and April, the annualized growth rate in my view was well above 7 and a half 8%. So if we are slowing and we have to slow down because oil prices have gone up and they're going to stay high for longer. Um we are slowing from a much higher level. So I think as earnings stabilize, I think FIS will start to come back on the on the need to meet liquidity. As Samir was saying that uh you know this current currency market panic is mostly about liquidity because you know exporters are panicked so they're not bringing back dollars in time importers are excessively hedging some FBI are excessively hedging so there is outright panic in the currency market to stem that you need what you call crowd control measures so you try to get 30 40 $50 billion so at a at a strategic level I think a much simpler solution is to target bond investors. So what you say is a 20% withholding tax on bonds which frankly even China has waved for the index inclusion stuff you you get included in the two big indices you get 85$90 billion over two years and that I think will solve the currency market panic so and that is cheap capital uh you get dollar funding at 7%.

[00:06:42]Uh if you get private equity funding it comes at 15%. So uh so I think there are solutions to this. Uh there's no need to panic. Uh currency market is in panic.

[00:06:51]So we have to take some hard measures and urgent measures. But beyond that I don't think there is much