The relentless selling by FIIs continued in November. After selling equity for Rs 113,858 crore through exchanges in October, FIIs have sold another Rs 41,872 crore of equity through exchanges this month (till November 22). The trend of FII buying through the primary markets also continued with Rs 15,339 crore worth of buying in November
Mumbai/New Delhi: Foreign investors have pulled out Rs 26,533 crore from the Indian equity market this month so far owing to increasing allocations to China, concerns over muted corporate earnings and elevated valuation of domestic stocks.
While the sell-off continues, the quantum of net outflows has significantly reduced compared to October, when Foreign Portfolio Investors (FPI) withdrew Rs 94,017 crore (USD 11.2 billion) on a net basis.
With the latest pull-out, FPI outflows on a net basis are Rs 19,940 crore in 2024 so far.
Last week, the BSE benchmark zoomed 1,536.8 points, or 1.98 per cent, and the Nifty climbed 374.55 points, or 1.59 per cent.
The BSE benchmark Sensex jumped 1,961.32 points, or 2.54 per cent, to settle at 79,117.11 on Friday. The NSE Nifty soared 557.35 points or, 2.39 per cent, to 23,907.25.
Going ahead, the flows from foreign investors into the Indian equity markets would depend on the policies implemented under Donald Trump’s presidency, the prevailing inflation and interest rate dynamics, the trajectory of the geopolitical landscape, and the third-quarter earnings performance of Indian companies, Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said.
According to the data, FPIs recorded a net outflow of Rs 26,533 crore so far this month (till November 22). This came following a net withdrawal of Rs 94,017 crore in October, which was the worst monthly outflow.
However, in September, foreign investors made a nine-month high investment of Rs 57,724 crore.
The relentless selling by FIIs continued in November. After selling equity for Rs 113,858 crore through exchanges in October, FIIs have sold another Rs 41,872 crore of equity through exchanges this month (till November 22). The trend of FII buying through the primary markets also continued with Rs 15,339 crore worth of buying in November.
The total FII selling through the exchanges for the period October 1-November 23 stands at Rs 155,730 crore.
“This is the kind of selling that happens in a year when FIIs are in selling mode,” said Vinod Nair, Head of Research, Geojit Financial Services.
Concerns over the elevated valuations of Indian equities persist, prompting FPIs to redirect their attention toward markets offering more attractive valuations, Srivastava said.
Additionally, China continues to draw significant foreign inflows at India’s expense, bolstered by its compelling valuation levels and the recent announcement of stimulus measures aimed at revitalizing its slowing economy, he said.
Furthermore, India’s sub-par corporate earnings and elevated inflation figures have raised concerns about potential delays in domestic interest rate cuts, he added.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, flagged investors’ concerns surrounding FY25 earnings. He added that while the ‘Sell India, Buy China’ trade is over, ‘the Trump trade’ also appears to be on its last leg since valuations have reached high levels in the US.
In terms of sectors, FPIs have been buying IT stocks while banking stocks have been resilient despite facing selling pressure, mainly due to support from domestic institutional investors.
On the other hand, FPIs withdrew Rs 1,110 crore from the debt general limit and invested Rs 872 crore in the debt Voluntary Retention Route (VRR) this month until November 22.
So far this year, FPIs invested Rs 1.05 lakh crore in the debt market.
However, the heavy selling by the foreign institutional investors (FIIs) in India is set to taper off soon as valuations of large-caps have also come down from the elevated levels, market watchers said.
FIIs have been buying IT stocks and this has been imparting resilience to IT stocks. Banking stocks have been resilient despite FII selling, mainly due to domestic institutional investor (DII) buying, said experts.
Three key factors led to this massive selling by FIIs. One, the ‘Sell India, Buy China’ trade and the second, concerns surrounding FY25 earnings.
“The third factor is the ‘Trump trade.’ Of the three, the ‘Sell India, Buy China’ trade is over. The Trump trade also appears to be on its last leg since valuations have reached high levels in the US,” Nair elaborated, adding that therefore, the FII selling in India is likely to taper off soon.
According to Rohit Agarwal, CEO, Funds Business, Dovetail Capital, the recent SEBI measures enhance market stability and play a crucial role in safeguarding investor interests, ensuring a more resilient derivatives market.
“Limiting weekly expiries to a single index on NSE and BSE could encourage a shift in trading volumes towards GIFT City, which still offers a wider range of weekly options. From an FPI perspective, this creates an attractive opportunity for those seeking flexibility in trading strategies,” he mentioned.
While some of the selling by FIIs in the secondary market is being counterbalanced by buying in the primary market – through large initial public offerings like those from Swiggy and Hyundai, it is expected that FIIs will reduce their selling as we near the end of the calendar year.
“Fresh allocations or significant investments are likely to occur once there is greater clarity regarding the Trump administration’s policies,” said Vipul Bhowar, Senior Director, Listed Investments, Waterfield Advisors.
The upcoming large IPOs may briefly increase investments in the primary market, but ongoing interest will depend on macroeconomic stability and corporate earnings performance, said experts.
Global factors and FII activity will dictate trends in domestic equity markets this week while assembly poll results of Maharashtra and Jharkhand may impact stocks on Monday, say analysts.
Stock markets witnessed a spirited recovery on Friday with benchmark Sensex and Nifty notching the best single-day gains in more than five months and offering relief after weeks of correction.