Foreign Portfolio Investors (FPIs) Continue Selling Trend; Withdraw Rs 5,800 Crore from Equities in November

Foreign portfolio investors (FPIs) have continued their selling spree in Indian stocks this month, with sales amounting to over Rs 5,800 crore. This trend follows withdrawals of Rs 24,548 crore in October and Rs 14,767 crore in September. Prior to this outflow, FPIs had been consistently buying Indian stocks for six months from March to August, bringing in Rs 1.74 lakh crore during that period.

It’s worth noting that experts believe this selling trend may not continue, as the U.S. central bank has signaled a dovish stance in its recent meeting. FPIs sold shares worth Rs 5,805 crore during November 1-10, and while the selling has eased this month, it has not reversed.

The reasons for this trend include rising interest rates and geopolitical tensions in the Middle East due to the conflict between Israel and Hamas, as well as an increase in U.S. Treasury bond yields. In this uncertain environment, some foreign investors may be turning to safe assets like gold and the U.S. dollar.

In contrast, the debt market in India has attracted FPI investments of Rs 6,053 crore during the period under review, and this might be a tactical move by foreign investors to allocate funds to Indian debt in the short term, with the intention of returning to equity markets when conditions become more favorable.

The inclusion of India’s G-Sec in the JP Morgan Emerging Markets Government Bond Index has increased foreign funds’ participation in the Indian bond market. As a result, FPIs have invested a total of 90.161 billion rupees in equity and 41.554 billion rupees in the debt market this year.

Despite impressive Q2 results and prospects in the financial sector, FPIs continue to sell financial stocks. In these uncertain times, FPIs seem to be seeking the safety of the 10-year U.S. bond yield, which is currently around 4.64 percent. This sustained selling by financial FPIs has made the valuation of banking stocks attractive. Some experts believe that banking stocks have the potential to outperform in the coming cycle, particularly during a general election, as history has shown.