October sales by FPIs highest since March 2020

Foreign portfolio investors or FPIs have traditionally been looked upon as the prime drivers of any bull run in the Indian stock markets. But one look at the statistics for the month of October would make one believe that these foreign investors are losing their hold on the equity markets.

Data from the National Securities Depository (NSDL) shows that FPIs were net sellers of Indian shares worth Rs 13,550 crore in October. This was the highest monthly net sales by FPIs in more than a year and a half.

Last year in March, FPIs had sold a record Rs 61,973 crore worth of shares and since then no single month has seen such a high quantum of sales. Further, the latest outflow comes on the back of two successive months of net buying wherein FPIs bought shares worth a cumulative Rs 15,237 crore.  

The current calendar year has seen FPIs net sellers on only three earlier occasions – April (Rs 9,659 crore net outflow), May (Rs 2,954 crore net outflow) and July (Rs 11,308 crore net outflow).

Interestingly, even as FPIs pressed the sell button in October, there was not much of an impact in the stock market as the benchmark Sensex remained largely flat with a gain of 0.31 per cent or around 181 points.

Market participants attribute this trend to the fact that stocks are seeing a strong support from local money in terms of inflows from mutual funds, domestic institutional investors along with retail and HNIs.

 

Incidentally, even as FPIs were net sellers in the months of May and July, the 30-share Sensex gained nearly 6.5 per cent in May while staying largely unchanged in July. In April, however, it lost 1.47 per cent as FPIs were net sellers at Rs 9,659 crore.  

India, however, is not alone in witnessing such volatile foreign flows as all emerging markets have registered a similar trend ever since the US Federal Reserve has talked about a gradual rollback of the liquidity programme and a possible hike in interest rates from next year.

Any increase in interest rates in the US narrows the spread that these foreign investors earn while investing in the global markets.  

Further, a huge jump in the valuations of the Indian indices is also looked upon as one of the reasons why many foreign investors are looking to book profits and invest elsewhere as well. The benchmarks Sensex and Nifty are up nearly 26 per cent and 28 per cent, respectively in the current calendar year.

This is higher than most of the global leading equity indices like Kospi (1.17 per cent), hang Seng (-8.44 per cent), FTSE (11 per cent), Dow Jones (19 per cent), Bovespa (-11.70 per cent) and S&P500 (24.5 per cent).

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