Foreign Portfolio Investors’ Outflow Hit Record Level in Just 3 Days into December

Foreign portfolio investors (FPIs) went into a selling spree like never before, right from the beginning of this Christmas month. They have offloaded (net selling) a whopping ₹8369 crore of Indian equities in just the first three days of the month, which is even double the total amount of equities sold (net) during the month of November. This massive selling by the foreign investors is taking the Rupee to an all-time low, and it even touched the ₹90 per USD level now. 

So why this huge sell-off? Let’s find out. 

Factors Driving FPIs out of Indian Equities 

The massive sell-off in the past three days has raised many questions about the market sentiment in the Indian stock market. Experts are suggesting that this selloff is a result of the delay of the US trade deal, which is yet to be finalised, and the absence of the same is hindering the market sentiment adversely. 

Another crucial reason could be the premium valuation of the Indian stock market. The valuations are pretty high, while the earnings growth is not sufficient to support such havoc valuations. This, in turn, reduces the upside potential, making the Indian equities less desirable for the foreign portfolio investors. 

Having said that, experts are also of the view that this outflow in the first three days can be set off to an extent by the inflows into the upcoming big IPOs in the pipeline. This also indicates the shift in the interest of the foreign investors towards the primary market from the secondary market. 

Sectoral Shift in FPI Investments 

It is not just that the FPIs are shifting their focus from the secondary markets to the primary markets and investing heavily in the IPOs. They are also reallocating their funds across sectors and reshuffling their investments. If you look at the monthly data of November, then in the second half of the month, foreign investors increased their stake in the telecom sector, oil and gas sector, and also in the capital goods sector while selling off consumer stocks, financial services, and IT stocks. 

Sectors with FPI Inflows 

Telecom stocks attracted the largest amount of FPI investments in the second half, with FPI purchases of ₹4913 crore, while in the first half of the month, the purchase stood at ₹9413 crore. Following telecom stocks, there are oil and gas stocks, which also witnessed a massive inflow of ₹4177 crore and ₹2992 crore in the second and first half of November, respectively. 

As can be seen in the table above, the consumer durables and healthcare sector shifted to FPI’s good books in the latter half of November. From being net sellers of these sectors in the first half, they robustly purchase these stocks in the second half. 

Sectors with FPI Outflows 

FMCG witnessed higher sales by FPIs during November. They offloaded equities worth ₹2722 crore in the second half of the month, while ₹2040 crore in the first half. FPIs also dumped auto stocks worth ₹1257 crore and ₹385 crore in the second and first half, respectively. 

Financial services recorded FII selling worth ₹1137 crore between 16^th to 30^th November, after it saw ₹2041 crore wiped away by FIIs during the first half. 

Wrapping up 

So, it is quite interesting to observe how foreign portfolio investors are reshuffling their portfolios. While the overall selling pressure by the FPIs is huge at present, they are also buying from select sectors, which can indicate opportunities. Moreover, their shift towards the primary market from the secondary market is shaping the overall market dynamics. 

Source: https://www.moneycontrol.com

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