Foreign portfolio investors sell Rs 28,242 cr of equities so far in May

In January last year, FPIs offloaded Rs 28,852 crore of domestic shares, according to data provided by National Securities Depository Ltd (NSDL). In the calendar year 2024 (up to May 17) FPIs sold Rs 26,020 crore worth of local shares.

In the cash market, foreign investors sold Rs 35,532 crore through May 17, which was almost matched by DII (domestic institutional investors) buying of Rs 33,973 crore during this period. “The main trigger for the FII selling has been the outperformance of the Hong Kong index Hang Seng which shot up by 19.33 per cent during the last one month. FIIs are moving money from expensive markets like India to cheap markets like Hong Kong where the PE is around 10 compared to around 20 PE in India,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Uncertainty surrounding the election outcome also has contributed to heightened volatility in the Indian market. The recent spike in the fear gauge VIX indicates a high level of uncertainty in the market, he said.

India VIX, an indicator of the market’s expectation of volatility over the near term, has crossed the 21-mark in the current month. “This shift in FPIs’ behavior is not a random occurrence. It is a direct response to the ongoing geopolitical crisis in the Middle East, relative valuation discomfort, and the strength of US bond yields,” said Vipul Bhowar, Director, Listed Investments, Waterfield Advisors.

According to Vijayakumar, going forward, there is likely to be a dramatic change in FPI equity flows in response to election results. Political stability will attract huge inflows.

In the debt market, FPIs net bought Rs 45,087 crore on a net basis and in the debt-VRR (Voluntary Retention Route), they purchased Rs 7,040 crore so far in 2024, NSDL data showed.