FPIs emerge net sellers in October, offload ₹20,356 crore in Indian equities

The ₹20,356 crore-figure also includes bulk deals and investment in primary market. The selling by FPIs through exchanges has been higher at ₹25,575 crore, according to NSDL data. FPIs have reversed the prior three-month trend of sustained buying and emerged net sellers in September and October. Surging US bond yields have been the major reason for FPI outflows since last month, according to analysts.

‘’Heightening geopolitical tension in the Middle East and US Federal Reserve hinting at more rate hikes may see treasury yields staying higher, which could prompt further foreign fund outflows from emerging markets, including India,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

Also Read: FIIs offload ₹1,500 crore in Indian equities, DIIs invest ₹314 crore as Nifty50 snaps 6-day losing streak

Why are FPIs extending their selling streak?

FPIs were sellers in sectors like financials, power, FMCG and IT. ‘’The primary reason for the sustained selling is the sharp spike in US bond yields which took the 10-year yield to a 17-year high of 5 per cent. The yield has now declined to 4.84 per cent. With such high bond yields it is rational for FPIs to take out some money. The Israel-Hamas conflict in West Asia and the uncertainty surrounding the conflict has added to negative sentiments in the market,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The 10-year yield rose to 7.3645 per cent on October 6, with the 15 basis points increase its biggest single-session rise since May 4, 2022. One basis point is one hundredth of percentage point.

Analysts reckon that the Indian market continues to exhibit resilience even in the midst of several challenges and there is a growing concern among FPIs that if they continue to sell, they will miss out on the potential rally in the Indian market. This might restrain the FPIs from selling heavily in the coming days.

FPIs inflow higher in Indian debt market

Another important feature of FPI investment is the increasing inflows into the debt market, according to market experts. There are several reasons behind the inflows in Indian bonds.

‘’One, FPIs are diversifying their investment amidst global uncertainty and weakness in the global economy. Indian bonds are giving good yields and INR is expected to be stable given India’s stable macros. Another factor is the inclusion of India in the JP Morgan Global Bond Index. Some FPIs are preempting the Indian bond buying by the major buyers,” said Geojits’ Dr. V K Vijayakumar.

How is foriegn outflow impacting Indian markets?

FPI selling has impacted the financial services and IT segment more than others, according to analysts. ‘’The reason is that these two segments account for the major part of FPI’s AUM (Assets Under Management). Out of the total FPI AUM of around $ 652 billion financial services account for $213 billion and IT accounts for $ 64 billion. It is important to note that stock prices in these segments are weak due to FPI selling and not due to any fundamental factors,” explained Geojits’ Dr. V K Vijayakumar.

According to NSE data, foreign institutional investors (FII) have remained net sellers in October 2023. They have sold out Indian stocks worth near ₹2,600 crore till October 27. FIIs sold around 13,186 crore in the cash market last week. The FIIs selling in October 2023 is highest since January 2023. In January 2023, FIIs had sold out Indian stocks worth ₹41,464.73 crore. Yet, DIIs have provided full support to the Indian stock market as they have bought shares worth ₹23,437 crore in this month.

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Updated: 28 Oct 2023, 04:53 PM IST