The situation is made more critical by the meltdown of IL&FS, that has now effectively been taken over by the government, and the housing finance companies.A further fall in stock market prices would lead to FIIs pulling more money out of the country and a China dust proof seal Suppliers further fall in the rupee. A consequence would be that many large companies took huge sums from abroad under external commercial borrowings. They would see their profitability reduce because as much as 38 per cent of the total external debt of $530 billion is through ECBs. As the downward spiral of the rupee continues, its effect will be felt in the government not being able to hold the fiscal deficit, inflation in oil and other imports, the fall of investments made in the stock market and the increased cost to companies in repaying foreign loans.New Delhi: Foreign investors have pulled out over Rs 9,300 crore (USD 1.3 billion) from the Indian capital markets in the last four trading sessions on unabated fall in rupee and rise in crude oil price.The latest withdrawal comes following a net outflow of over Rs 21,000 crore from the capital markets (both equity and debt) last month.
Prior to that, they had put in a net amount of Rs 7,400 crore in July-August.According to the latest depository data, foreign portfolio investors (FPIs) withdrew a net sum of Rs 7,094 crore from equities during October 1-5, and Rs 2,261 crore from the debt market, taking the total to Rs 9,355 crore (USD 1.3 billion). FPIs have been net sellers almost throughout this calendar year except a couple of months. However, the swiftness of the exit in October thus far has shaken the market, experts said.”Rise in oil prices and US treasury yields and a tightening of global dollar liquidity are the key reasons for the FPI selling as they have induced high volatility in currency, bond and equity markets. “One must however remember that this is a global phenomena across emerging markets and not limited to India alone. Of course, the impact of rise in oil prices is higher for India as it imports most of its oil requirements.Washington: US President Donald Trump may count Prime Minister Narendra Modi among his international allies, but New Delhi is smarting over unexpected US decisions it sees as ignoring the interests of an increasingly close partner.
The Trump administration this week said it would start to sanction countries that do not comply with its orders to stop buying oil from Iran, demanding that eight governments — including India and China — end all imports when six-month waivers run out next week.The move, which triggered a hike in global oil prices that could disproportionately hit Indians, came just as PM Modi was campaigning for a new mandate in ongoing, multi-phase elections.The Iran diktat followed Trumps announcement in March that India, along with Turkey, would no longer enjoy a preferential trading status for a wide range of manufactured goods.Trump, who has rocky relations with the leaders of numerous Western allies, has publicly highlighted his bond with PM Modi.The Congress quickly seized on the Iran sanctions to attack PM Modi. Spokesperson Randeep Singh Surjewala tweeted that the PM is “sitting as a mute spectator over the countrys oil needs and security.”Trump has also drawn resentment in India over viral reports that he mimics PM Modis accent in private — a far cry from the reverential treatment US presidents since Bill Clinton have shown Indian leaders.