FPIs have withdrawn a net of Rs 6,475 crore from equities in September, according to depositories data for this month. (Reuters)

Foreign investors have pulled out close to Rs 6,500 crore from stock markets in September amid worries over a global economic slowdown, making it the second consecutive monthly outflow.

However, debt markets have seen an inflow of Rs 692 crore during the period under review.

Analysts are now optimistic about capital inflows after the Reserve Bank lowered the key lending rate by 50 basis points, which they expect may provide a positive momentum to the markets.

The latest pull-out follows a record net outflow of Rs 17,428 crore from equities last month. That was the highest net outflow by foreign portfolio investors (FPIs) in a single month since 1997.

The segregated data prior to 1997 was not available.

FPIs have withdrawn a net of Rs 6,475 crore from equities in September, according to depositories data for this month.

Market experts attributed huge outflows to sustained global risk-off trend along with concerns over economic slowdown and currency devaluation in China.

Besides, liquidity problems in the gulf countries due to prolonged slump in crude prices has prompted these nations to withdrew large chunk of their sovereign wealth fund from capital markets globally.

Since the beginning of the year, FPIs have made a net investment of Rs 21,047 crore in equities and Rs 39,395 crore in debt markets.

A lot of PE firms tend to remain invested in portfolio companies for a period of five to eight years and exit these investments at a premium at the end of this tenure. (Express archive)

The current calendar year has seen private equity investments to the tune of $11.8 billion, which is higher that $11.1 billion for the whole of calendar 2014. As per data sourced from Venture Intelligence, PE exits during the current calendar have also touched a record high at $6.8 billion, which is nearly double of $3.9 billion recorded in 2014, and, in fact, the best so far for PE exits.

Data analysis indicates a five-fold jump in exits via strategic sales, which stood at $483.49 million in 2014 versus $2.5 billion in CY2015 (year-to-date), while exits via the secondary route climbed to $1.6 billion in CY2015 YTD from $349.12 million in CY2014. PE exits via the buyback option gained momentum and stood at $434.49 million in CY2015 YTD versus $137.95 million in CY2014. Exits via IPO totalled $2.2 billion in comparison to $2.8 billion in CY 2014.

While the record exits can be explained by the investment cycle — with the end of five-seven years, PE firms make an exit — higher investment is attributed to better investor confidence. “This year may be the best ever. I think I can close north of $15 billion. The good part is the PE exit-to-entry ratio of 35 to 40, which is a fairly good ratio at this point of time,” noted Akhil Awasthi, managing partner, Tata Capital Growth Fund.

Among the top five PE exits, iGate’s strategic stake sale to Capgemini, pegged at over $1 billion, allowed Apax Partners to exit its holding in the company. Likewise, Baring Asia exited its investment in Lafarge India via the buyback route in a deal valued at around $300 million.

PE exits in CY 2015 also include stake sale via open market transactions by investment firms including Chrys Capital, KKR, Tiger Global, Apollo Management and GIC that had invested in sectors like banking, telecom, IT, media and FMCG.

For example, Chrys Capital offloaded its stake in ING Vysya Bank for $137 million, returning 3.6 times to investors. PE giant Tiger Global had partly exited Just Dial by selling 3.41% stake in it for $50 million, giving a return of 14 times to investors. Singapore’s sovereign wealth fund GIC exited investment in FMCG company Marico, with a return multiple of 1.95 times, at $34 million.

Similarly, KKR marked its first exit in the country by selling its entire holding of 2.5% in telecom tower company Bharti Infratel for $136 million. KKR had invested in Bharti Infratel in 2008 and this was its second investment in India. Apollo Global Management partly exited its investment in media and entertainment company Dish TV by selling 3% stake for $41 million, securing a return multiple of 2.06 times.

American PE firms KKR and Apollo Global Management, counted amongst the largest PE firms in the world, made their maiden investments in the country during 2006 and 2009, respectively.

A lot of PE firms tend to remain invested in portfolio companies for a period of five to eight years and exit these investments at a premium at the end of this tenure. PE funds invested around $19 billion in India in 2007, the highest quantum of PE investment made into the country in a single year ever. This was followed by investments of around $10 billion in 2008.

“Promoter buyback and secondary sales will be the preferred options for most PE players, since there is a bit of inertia in the IPO market with the experience of investors not being very positive,” said Harish HV, partner at Grant Thornton India, adding, “However, a few good IPOs can revive investor appetite.”

Small and medium companies on the BSE have outperformed their large-cap peers so far this fiscal as the constituents of the benchmark index Sensex faced selling pressure amid global and domestic growth concerns. (Express Photo)

Small and medium companies on the BSE have outperformed their large-cap peers so far this fiscal as the constituents of the benchmark index Sensex faced selling pressure amid global and domestic growth concerns.

While the mid-cap index has gained 2.31 per cent to 10,818.68, the small-cap index has seen a rise of 1.39 per cent to 11,042.60 from April 1 to October 1.

In contrast, the 30-stock Sensex, consisting of large- caps, has lost 6.21 per cent to 26,220.95.

The index hit an all-time high of 30,024.74 on March 4, 2015. However, the gauge gave up most of the gains after that and touched one-year low of 24,833.54 on September 8.

Sensex crashed by 1,624.51 points on August 24 — its biggest single-day fall — wiping out over Rs 7 lakh crore from investors’ wealth on a sharp global sell-off triggered by the Chinese slowdown.

Markets have been highly volatile in the past couple of quarters on weak corporate earnings and negative global cues, including devaluation of the Chinese currency and fear of rate hike by the US Federal Bank.

The mid-cap index touched its all-time high of 11,666.24 on August 10, 2015 and the small-cap index recorded its lifetime high of 12,203.64 on August 5.

Foreign investors, a key driver of the Indian stock market, have also turned sellers recently on account of various global and domestic factors.

Marketmen say smaller stocks are generally bought by local investors, with overseas investors focusing on blue-chip shares.

The mid-cap index tracks companies with a market value that is on an average one-fifth of blue-chips or large firms. Small-cap firms are almost a tenth of that.

Sebi has barred Rahul Hi Rise and its directors from raising funds from investors till further directions. (Reuters)

In a fresh crackdown on illegal money pooling scheme, markets regulator Sebi has barred Rahul Hi Rise and its directors from raising funds from investors till further directions.

Besides, the company and its directors have been barred from the securities market.

A probe by Securities and Exchange Board of India (Sebi) found that Rahul Hi Rise had mobilised nearly Rs 30 crore by issuing ‘Secured Redeemable Debentures’ to at least 100 investors during 2009-10 and 2010-11.

Since the shares were issued to over 50 people, the issuance qualified as a public issue which requires compulsory listing on a recognised stock exchange. It was also required to file a prospectus, which it failed to do.

In an interim order passed on October 1, Sebi said that Rahul Hi Rise shall forthwith cease to mobilise fresh funds from investors through the Offer of NCDs or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions.”

The company and its directors — Abhijit Majumdar, Dipankar Gupta and Mrinmoy Bose — have been prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions.

They have been directed to provide a full inventory of all their assets and properties. Besides, they have been restrained from disposing of any property of the company without getting prior approval from Sebi.

Further, Sebi has prohibited debenture trustees — Dinendra Nath Bandopadhyay and Well Being Trust (represented by Chapal Biswas and Dinendra Nath Bandopadhyay), from continuing with their present assignment in respect of issuance of securities in Rahul Hi Rise case and has also barred them from taking up any new assignment in a similar capacity.

Metropolitan Stock Exchange’s Managing Director and CEO Saurabh Sarkar will resign soon as the bourse grapples with tough business conditions and low cash reserves.

The board of the exchange, earlier known as MCX-SX, would be meeting next week to appoint the successor to Sarkar.

“Saurabh Sarkar, MD & CEO of Metropolitan Stock Exchange of India Ltd (MSEI), formerly MCX-SX, has expressed his desire to resign. The board of MSEI will be meeting shortly to appoint a new MD & CEO,” a spokesperson from the bourse said.

Sources said that non-performance and failure to turn around the business of the exchange are the main factors that have led to the imminent exit of Sarkar.

The exchange has only two to three months of cash reserve left with it, they added.

According to sources, MSEI’s board took a strong view of the situation and is believed to have asked Sarkar to leave.
The board is expected to meet next week to decide on appointing a MD and CEO. Metropolitan Clearing Corporation’s head Udai Kumar is likely to be given the interim charge of the exchange, sources added.

MSEI rechristened itself from MCX-SX in the wake of the turmoil at its former promoter Financial Technologies that was triggered by the Rs 5,700-crore payment crisis at the National Spot Exchange Ltd (NSEL).