FPIs Offload Rs 61,006 Crore In Financial Services Stocks in 2024

Foreign portfolio investors (FPIs) have sold Rs 61,006 crore worth of financial services stocks in India this year, reflecting a significant shift in investment strategy driven by lower valuations in China.

According to data from the National Securities Depository (NSDL) for the period from January 1 to October 15, 2024, this marks a sharp contrast from 2023, when FPIs purchased Rs 31,824 crore worth of stocks in India’s financial services sector.

The outflow from financial services companies follows China’s recent economic stimulus measures, which have made Chinese stocks more attractive to FPIs seeking value investments. Analysts attribute the FPI exodus to a “sell India, buy China” strategy, as the Indian market, despite a recent 7 per cent correction, remains relatively expensive. Weak performances by select private sector banks and non-banking financial companies (NBFCs) have also raised concerns, intensifying FPI withdrawals from the sector.

With a total AUM of USD 980 billion in India, FPIs have the largest exposure in financial services, comprising 28 per cent of their investments, followed by information technology. In October alone, FPIs offloaded Rs 23,274 crore in financial services shares, while broader equity sales from FPIs reached Rs 91,819 crore (USD 10.934 billion) between October 1 and October 30.

This selling activity is largely focused on liquid stocks that FPIs had invested in previously, whose prices have since appreciated. Profit-booking on these investments allows FPIs to reallocate their funds to the comparatively undervalued Chinese market.

Apart from financial services, FPIs pulled out Rs 23,095 crore from oil, gas, and consumable fuels, marking the second-highest sector outflow, followed by construction (Rs 12,025 crore), FMCG (Rs 11,233 crore), and power (Rs 6,317 crore) between January and mid-October 2024. These sectors had previously seen FPI inflows during the same period in 2023.

In contrast, sectors attracting FPI inflows this year include telecommunications (Rs 29,538 crore), capital goods (Rs 28,610 crore), consumer services (Rs 21,901 crore), healthcare (Rs 21,788 crore), and realty (Rs 13,868 crore), indicating a shift towards more stable, growth-oriented industries within India.

With the Sensex and Nifty down approximately 7 per cent in the past month following a 36 per cent gain over the preceding 16 months, the Indian market is witnessing a volatile phase that reflects FPI strategy adjustments amid global economic uncertainties.