The selling spree in Indian stock markets by foreign portfolio investors (FPIs) turned aggressive in May, partly attributable to a strong US dollar, sticky inflation particularly in the food segment, and poll outcome-related anxieties.
With over 10 days more to go in May, the latest data from National Securities Depository Limited (NSDL) showed that foreign investors sold Indian stocks worth Rs 28,242 crore.
In April too, FPIs were net sellers in Indian stocks, as the ongoing geopolitical crisis in the Middle East then likely pushed investors to take money off their portfolios.
FPIs, who continued to remain net buyers for the third month until till mid-April, have cumulatively sold stocks worth Rs 8,671 crore by the end of the month, NSDL data showed.
"The main trigger for the FII selling has been the outperformance of the Kong Kong index Hang Seng which shot up by 19.33 per cent during the last one month. FIIs are moving money from expensive markets like India to cheap markets like Hong Kong where the PE (price-to-earnings ratio) is around 10 compared to around 20 PE in India," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
“Going forward, there is likely to be a dramatic change in FPI equity flows in response to election results. Political stability will attract huge inflows.”
Going back, FPIs aggressively sold Indian stocks and turned net sellers in the Indian equity market in January 2024, before turning net buyers thereafter. In February and March, they were net buyers.
Interestingly, at a time when the overseas investors have been remaining net sellers in Indian equities for the past several sessions, domestic institutional investors stayed net buyers, making up for the outflows by the foreign investors.
Back in December, FPIs accumulated stocks worth Rs 66,135 crore. In November, the FPI inflow was Rs 9,001 crore, historical data available on NSDL website showed.
To put it into context, the entire year saw an inflow of about Rs 171,107 crore, and notably, over one-third of it came in December. The strong inflow of funds from foreign portfolio investors (FPIs) had then supported the benchmark stock indices to march towards all-time highs.
Before November, FPI participation in Indian stocks was lukewarm, and they had turned net sellers. They sold Rs 14,768 crore and Rs 24,548 crore in September and October, respectively.
