FPI sold over Rs 22,000 crore worth of Indian stocks; here is why

In May till date, foreign portfolio investors (FPIs) significantly increased their selling activity in the Indian stock markets, with the total investment reaching Rs 22,046 crore. This heightened selling can be attributed to several factors, including a strong US dollar, persistent inflation concerns, particularly in the food sector, and anxieties surrounding the outcome of the elections.

However, there has been a recent slowdown in the selling activity, possibly due to expectations of a strong performance in the indices. Both the Nifty and Sensex reached all-time highs this week, attracting substantial investments. A week ago, cumulative selling amounted to around Rs 28,000 crore, according to data from the National Securities Depository Limited (NSDL).

Vipul Bhowar, Director of Listed Investments at Waterfield Advisors, suggests that the significant dividend payout of Rs 2.11 lakh crore from the RBI to the central government for the fiscal year might have prompted FPIs to pause their selling temporarily.

Bhowar also notes that while near-term flows are being impacted by global macroeconomic uncertainty and volatility, the long-term outlook for FPI flows into Indian debt remains positive due to India's inclusion in global bond indices. He anticipates that the trend will reverse once the interest rate outlook becomes clearer.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, observes that FII selling, which started slowly in April, intensified in May. He predicts that as clarity emerges on the election outcomes, FIIs are likely to buy in India to capitalize on the post-election results rally, which may even begin before the official announcement of results.

In April, FPIs continued to be net sellers in Indian stocks, possibly influenced by the ongoing geopolitical crisis in the Middle East. However, domestic institutional investors remained net buyers during this period, partially offsetting the outflows from foreign investors.

Despite FPIs aggressively selling Indian stocks and turning net sellers in January 2024, they subsequently became net buyers in February and March. Interestingly, domestic institutional investors have remained net buyers, largely compensating for the outflows by foreign investors in recent sessions.

(With inputs from agencies.)

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