The selling spree in Indian stock markets by foreign portfolio investors (FPIs) turned aggressive in May, standing now at Rs 22,046 crore with a few more days still to go as the month ends.
The consistent offloading of money from Indian stocks is partly attributable to a strong US dollar, sticky inflation, particularly in the food segment, and poll outcome-related anxieties.
However, in the past few sessions, they seemed to have slowed down on selling, expecting a strong performance in the indices. Both Nifty and Sensex also touched all-time highs this week, accumulating huge sums of money for investors.
A week ago, the total selling, cumulatively, was around Rs 28,000 crore, data from National Securities Depository Limited (NSDL) showed.
“The bumper dividend payout of Rs 2.11 lakh crore from RBI to the central government for the fiscal year would have caused FPI to reconsider its strategy and temporarily halt selling,” said Vipul Bhowar, Director, Listed Investments, Waterfield Advisors.
“The long-term outlook for foreign portfolio investment (FPI) flows into Indian debt is positive due to India’s inclusion in global bond indices. However, near-term flows are being impacted by global macroeconomic uncertainty and volatility. The trend will reverse once the interest rate outlook becomes clearer,” added Bhowar.
According to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, “The FII selling which began as a trickle in April turned into a flood in May.
“Going forward, as clarity emerges on the election front, FIIs are likely to buy in India since they cannot afford to miss the post-election results rally. Actually, the rally may begin even before the election results,” he added.
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.
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 overseas investors have been remaining net sellers in Indian equities for the past several sessions, domestic institutional investors stayed net buyers, largely making up for the outflows by the foreign investors.