FPIs sell-off continues; take out Rs 8,000 crore from equities in October

Foreign Portfolio investors (FPIs) have dumped Indian equities worth Rs 8,000 crore in the first week of October on the back of dollar appreciation and the steady rise in the US bond yields.

This came after FPIs turned net sellers in September and pulled out Rs 14,767 crore. Before the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and brought in Rs 1.74 lakh crore during the period.

Going ahead, FPIs are unlikely to turn buyers in the market soon in the context of the elevated dollar and US bond yields, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

According to the data with the depositories, Foreign Portfolio Investors (FPIs) sold shares to the tune of Rs 8,000 crore in this month (till October 6). India continues to be on top of emerging economies in attracting FPI this year, but September witnessed selling and October has begun with the same trend.

"The dominant factor impacting capital flows to markets in recent weeks has been the steadily rising US bond yields. The early days of October witnessed a rout in the US bond market, which took the 30-year bond yield to 5 per cent briefly. The benchmark 10-year yield is consistently over 4.7 per cent forcing the FPIs to sell in emerging markets," Vijayakumar said.

Himanshu Srivastava, Associate Director - Manager Research, Morningstar India, attributed the outflow to economic uncertainties in the US and Eurozone regions, as well as growing concerns about global economic growth. This scenario led foreign investors to turn risk-averse.

Additionally, higher crude prices, sticky inflation numbers and the expectation that the interest rate may continue to remain at elevated levels longer than expected would have prompted foreign investors to adopt a wait-and-watch approach, he said.

Further, sub-normal monsoon in India and its impact on inflation is also a concern for the domestic economy, which foreign investors would be cognisant of, he added. The selling by FPIs was countered by domestic institutional investors (DII) buying.

On the other hand, FPIs invested Rs 2,081 crore in the country's debt market during the period under review. With this, the total investment by FPIs in equity has reached Rs 1.12 lakh crore and over Rs 31,200 crore in the debt market this year so far.

In terms of sectors, FPIs have been selling in financials, power, IT, and oil and gas, while they have been buyers in capital goods, autos, and auto components. Further, second quarterly results from financials, which are expected to be good, might restrain FPIs from selling in this segment, Geojit's Vijayakumar said.

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