Rs 976 Crore Pulled Out Of Indian Equities In Just One Week: Why Are FPIs Selling ?

Foreign Portfolio Investors (FPIs) reversed their buying trend this week, becoming net sellers in Indian equities with a withdrawal of Rs 976 crore. This shift comes as a result of a stronger US dollar and rising US 10-year bond yields, which have impacted global investor sentiment.

According to statistics from National Securities Depository Limited, FPIs sold down stocks worth more than Rs 4,102 crore over the next three sessions. FPIs began the week positively, investing Rs 3,126 crore in Indian equities during the first two sessions (December 16-20). However, this reversed in the following three sessions, with FPIs selling over Rs 4,102 crore, leading to an overall outflow of Rs 976 crore for the week. Despite this, FPIs have invested a total of Rs 21,789 crore in Indian equities in December, signaling continued confidence in India’s long-term growth potential.

FPI: Impact and Global Economic Conditions

The US Federal Reserve’s recent decision to cut interest rates by 25 basis points (bps) for the third time this year has contributed to market uncertainty. Although the Fed signaled fewer rate cuts ahead, this has dampened investor sentiment globally. Factors like rising inflation, weak corporate earnings, and slower GDP growth have also weighed on market confidence, further impacting FPI activity.

Strength of the US Dollar 

The strengthening US dollar (with the dollar index above 108) and the rise in US 10-year bond yields to 4.5 per cent have also played a role in the FPI selling. These global economic conditions are making US markets more attractive to investors compared to India.

FPI: Opportunities Amid Market Downturn

The recent FPI selling has lowered valuations in certain sectors, particularly large-cap stocks like banking, creating potential investment opportunities. Sectors such as pharma, IT, and digital platforms are expected to remain resilient in the face of broader market challenges.

FPI: Historical Context and Future Outlook

FPI trends have shown considerable volatility in recent months. After significant outflows of Rs 94,017 crore in October and Rs 21,612 crore in November, September had seen a high of Rs 57,724 crore in inflows. Year-to-date, FPIs have invested Rs 6,770 crore in Indian equities in 2024.

In summary, while FPIs have been net sellers in recent days due to global economic concerns, the long-term outlook for India remains positive, with some sectors offering attractive investment opportunities.