Foreign Portfolio Investors (FPIs) continued their selling in the Indian equity markets, recording net outflows of ₹19,994 crore in just the six trading sessions so far in November 2024.
For the first time this calendar year, FPI net investments turned negative with net outgo between January 1 to November 8 at ₹13,401 crore, data with depositories showed.
Except for Taiwan, FPIs have been net sellers in most emerging markets including China last week.
This sharp FPI selling in Indian equities in November came amidst a record setting uptrend in US market last week driven by the ‘Trump Trade’.
FPIs were also seen to be cautiously turning their focus to the stimulus announcements from China on Friday with Beijing’s week-long legislative meeting drawing to a close.
The latest aggressive FPI selling in Indian equities in November 2024 followed a record breaking gross outflows of approximately $13.5 billion (₹1,13,859 crore) in October 2024, the highest ever in absolute terms.
However, the aggressive FPI selling are being matched by robust buying by the domestic institutional investors (DIIs), which helped prevent a sharp fall in Indian equity benchmarks. Since end September, both Nifty50 and Sensex are down by 7-8 per cent.
Meanwhile, the US Wall Street’s benchmark indices Dow and S&P 500 wrapped up their best week in a year on Friday on the back of Donald Trump’s election win. All three averages including Nasdaq finished the week at record closing levels.
Trump on Tuesday swept back to the White House with Republicans taking back the Senate and potentially increasing their House of Representatives majority.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that the hallmark of the global market trend this week has been the record setting uptrend in the US market, being driven now by the ‘Trump trade.’
“Expectations of implementation of the promised corporate tax cuts and its positive impact on US corporate earnings is the fundamental logic behind this trend”, he said.
The rationale for the aggressive FPI selling is the elevated valuations in India which appear conspicuous in the context of the earnings deceleration evident in the Q2 numbers, Vijayakumar added.
“The FPI selling trend is likely to continue in the near-term till data indicate the possibility of a trend reversal. If the Q3 results and leading indicators reflect recovery in earnings, the scenario can change with FPIs reducing selling and even turning buyers. Investors will have to wait and watch for the data”,he added.
Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India, said “Though FPI community had been very cautious about Indian markets in the last couple of months, shifting their allocation to other countries like China; India still stands on better footing as compared to other markets”.
He highlighted that despite the ongoing outrage of funds since last month, this month saw an unprecedented applications of about 40-50 new FPI registrations which are eyeing to enter the Indian market. “All thanks to SEBI’s recent relaxation to NRIs, permitting them to participate upto 100 percent and announcing measures for ease of entry and operations in India”, he said.
The outcome of the recent election results held in the US has created an optimism for the Indian market considering the strategic partnership between the two countries. “This will boost the economic and mutual businesses and other foreign trade policies which will make India more lucrative for foreign investments. We may see the upside in FPI’s inflows in equity and debt segment turning in green in the coming few trading cycles”, Purohit said.
Sunil Damania, Chief Investment Officer, MojoPMS “Following the U.S. presidential election, we’ve observed a divergence between the U.S. and Indian stock markets. While U.S. markets may experience gains, the Indian market currently faces challenges, including high inflation, slowing urban consumption, and significant FPI selling”, he said.
“In our view, the recent U.S. election outcome will likely have minimal immediate effect on Indian market sentiment”.