As Foreign Institutional Investors (FIIs) continue to pull out from the Indian market, it has come to the fore that they sold bulk of their exposures in financial and IT stocks. As per brokerage house ICICI Securities, Financials and IT contributed 93 % of FPI selling over the past 12 months. 

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Also, the ongoing selling in Indian equities is the longest since the global financial crisis (GFC) of CY08, showed provisional data with the exchanges.  

"Sectorally, bulk of the FPI selling on 12 month rolling basis has been concentrated around financials and IT (93% contribution) along with FMCG, other services and construction materials whereas metals, power, discretionary consumption and telecom saw inflow," said the brokerage. 

Besides, FPI holdings within the NIFTY50, NIFTY Next 50, NIFTY Midcap and NIFTY Smallcap indices has dipped 188bps, 155bps, 138bps and 113bps to 23.1%, 15.1%, 14.6% and 12%, respectively. 

As per the brokerage report, the large-scale outflows from Indian equities by FPIs has been largely been driven by the fear of aggressive quantitative tightening by the US central bank to tame inflation and relatively higher valuations of Indian equities.  

The FIIs have been on one the longest selling sprees, extending the net selling for the record nine months in June 2022. At over Rs 50,000 crore, the FPI selling was also highest since March 2022, when the Foreign Portfolio investors sold around Rs 62,000 crore.  

"In June FPIs sold equity worth Rs 50145 cr through the stock market (NSDL data). This takes the total FPI selling in CY 22 to Rs 223944 cr. This massive capital outflow has significantly contributed to the depreciation in INR which breached 79 to the dollar recently," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.  

The relentless FPI selling has to be seen in the context of a steadily rising dollar and bond yields in US, the expert said.  

He said FPIs are selling more in countries with rising current account deficits (CAD) like India because the currencies of such countries are vulnerable to further depreciation. 

"Towards the end of June, FPI selling has been showing a declining trend. If the market rises in July anticipating or responding to good Q1 results, FPIs may again sell. This trend will be halted only when the dollar stabilises and US bond yields decline," the expert highlighted.  

Meanwhile, continuing to pull out funds, the FPIs offloaded equities to the tune of Rs 2,324.74 crore on the first day of July.