BackFPIs offload ₹14,768 crore in Indian equities, turn net sellers in September; What led to trend reversal?
FPIs have sold ₹14,768 crore worth of Indian equities and offloaded a total of ₹13,810 crore as of September 29, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data.
PremiumForeign portfolio investors (FPIs) gave a muted performance on D-Street and emerged net sellers in September, on record-high US bond yields and a stronger US dollar. FPIs have sold ₹14,768 crore worth of Indian equities and offloaded a total of ₹13,810 crore as of September 29, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data.
The ₹14,768 crore-figure also includes bulk deals and investment in primary market. Excluding the bulk deals and investment through the primary market, the sell figure in the cash segment rises to ₹26,689 crore, according to analysts. FPIs have reversed the prior three-month trend of sustained buying and emerged net sellers in September.
Why were FPIs net sellers in September?
FPIs turned net sellers in the cash market this month because strength in the US dollar index and the US 10-year bond yield remaining high are short-term negatives for FPI capital flows to emerging markets like India, according to analysts. High crude oil prices in the last week of September also weighed on FPIs market behavior.
Foreign institutional investors (FIIs) have sold ₹25,000 crore in cash markets this month, according to analysts. The US Treasury yields hit a 16-year high mark and crude oil prices almost touched $98 per barrel last week amid concerns over interest rates staying high for an extended period and its impact on the global economy. This has largely supported the FII selling streak since August.
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‘’FPIs have turned sustained sellers in September having sold stocks for ₹26,689 crore in the cash market. This sustained selling has been in response to steady dollar appreciation which took the dollar index close to 107 and the steady rise in the US bond yields which took the 10-year bond yield to around 4.7 per cent. The spike in the Brent crude to $97 also weighed on FPI selling,'' said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
When will buying resume?
Regarding sector specific investments, analysts observed that FPIs have been consistently buying in capital goods. Recently, they have been buyers in health care sector as well. Similarly, FIIs have also invested in capital goods and financials.
‘’The FPI flows may remain subdued in the short term until FED clarity but India will remain a sweet spot for long-term allocation among emerging markets. All other emerging markets have some issue or other. The next 5-10 years belong to India and FPIs have no choice but to come to India,'' said Mukesh Kochar, National Head - Wealth Management, AUM Capital.
DIIs' aggressive buying counters FII/FPI selling
The domestic market witnessed volatility in September as concerns over higher interest rates, foreign capital outflow and global economic slowdown weighed on sentiment. However, the Nifty 50 ended the month with a gain of 2 per cent while the Sensex rose 1.5 per cent. The BSE Smallcap index also rose about a per cent. The BSE Midcap index, on the other hand, jumped 3.7 per cent in September.
On Friday, frontline indices Sensex and Nifty ended with decent gains on Friday, tracking positive global cues, as investors shifted focus to the Reserve Bank of India's monetary policy outcome next week and the upcoming quarterly earnings.
Nifty 50 closed the day at 19,638.30, up 115 points, or 0.59 per cent while the Sensex closed at 65,828.41, up 320 points, or 0.49 per cent. The BSE Midcap index jumped 1.31 per cent while the BSE Smallcap index rose 0.57 per cent.
Also Read: FIIs sell ₹25,000 crore in Sept on high US bond yields, crude oil prices; What's expected in Oct?
Even though FIIs sold ₹25,000 crore in cash month this month, but domestic institutional investors (DIIs) infused a total of ₹19,310 crore, that closely countered FII selling and imparted resilience in markets.
‘’Last Friday (29th Sept) witnessed marginal decline in the dollar index, US bond yields and Brent crude. This has emboldened the DIIs to buy aggressively thereby imparting resilience to the market,'' said Geojit's Dr. V K Vijayakumar.
‘’In September, total FPI selling of ₹26,689 crore was countered with total DII buying of ₹19,310 crore. Even while selling FPIs were buyers in capital goods and selected financials,'' he added.
Going ahead, analysts believe that that persistent selling by foreign investors and global cues such as rising US bond yields and crude oil prices presents a bleak picture for markets in the near-term.
The benchmark Nifty 50 has retreated from its record-high level achieved earlier this month on unfavorable global triggers. Now, the tone is expected to remain bearish until Nifty crosses the 19,750-mark, according to market experts.
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