FPIs dump ₹29,520 cr in Indian equities this year: What’s behind the sell-off?
FPIs have sold ₹3,776 crore worth of Indian equities and the total inflow stands at ₹19,608 crore as of February 16, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data.
Foreign institutional investors (FIIs) were buyers for three out of five sessions last week, yet the total divestment stood at ₹6,240.55 crore, while domestic institutional investors (DIIs) were buyers for all five sessions, with a total investment of ₹8,731.6 crore, according to stock exchange data. On a monthly basis, FIIs have sold shares in Indian markets to the tune of Rs. 14,171 crore between February 1-16, 2024.
“The spike in US bond yields triggered by the higher-than-expected consumer price inflation led to sustained selling by FPIs in the cash market. In February through 16th, FPIs had sold equity worth ₹6,112 crore through the exchange. But, buying through ‘the primary market and others’ reduces the net sell figure for February through 16th to ₹3,775 crore,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Why are FPIs selling in equities?
FPIs snapped their buying streak in early January over global cues as the US bond yields rose from 3.9 per cent to 4.24 per cent, triggering capital outflows from emerging markets such as India, according to market experts.
‘’The trend of FPI selling is likely to continue so long as the US bond yields remain elevated. The sustained FPI buying in debt which started early this year also continues. FPIs bought debt for ₹16,559 crore in February through 16th taking the total buy figure for debt for 2024 to ₹36,395 crore. This trend is also likely to continue,” added Dr. V K Vijayakumar.
Currently, foreign investors are on a risk-off mode, due to the slowdown in the emerging markets economy due to high interest rates, core inflation and above average valuation. Currently, India is undergoing a ripple effect, and this mood is expected to continue in H1CY24, according to market experts.
However, there is a high possibility of improvement in the mood during H2, they added. The degree of improvisation will depend on the level of contraction in interest rate, inflation, budget and pick up in high frequency economy data.
The selling by FPIs in equity would have been much higher in response to the rising US bond yields. But FPIs have been consistently losing the tug of war with DIIs and, therefore, they are a bit reluctant to press aggressive selling. They will have to buy the same stocks later, which they have been selling, when conditions are favourable for buying, according to Dr. V K Vijayakumar.
FPI activity in Indian markets
FPIs turned massive sellers in January 2024 snapping their buying streak as investments saw a sharp uptick in December 2023 after they reversed their three-month selling streak in November 2023.
However, inflow intensified in December on strong global cues after the US Federal Reserve signalled the end of its tightening cycle and raised expectations of a rate cut in March 2024. This led to a crash in US bond yields and triggered foreign fund inflows into emerging markets like India.
For the entire calendar year 2023, FPIs bought ₹1.71 lakh crore in Indian equities and the total inflow stands at ₹2.37 lakh crore taking into account debt, hybrid, debt-VRR, and equities, according to NSDL data. FPIs’ net investment in Indian debt market stands at ₹68,663 crore during 2023.
FPI inflows into Indian equities during November 2023 stood at ₹9,001 crore, compared to over ₹39,000 crore worth of shares sold in September and October together, according to NSDL data. Taking into account debt, hybrid, debt-VRR, and equities, FPI inflows were at ₹24,546 crore during the month.
Overall, only four months in 2023–January, February, September, and October- saw net FPI outflows from Indian equities. May, June, and July each recorded FPI inflows above ₹43,800 crore.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 17 Feb 2024, 04:53 PM IST
