Updated: November 1, 2021 5:23:06 am
With the stock markets in a correction phase, foreign portfolio investors (FPIs) are on the exit mode. FPIs pulled out Rs 13,550 crore during October, including investments in the initial public offering (IPO) market. With this, net investments by FPIs in calendar year 2021 have fallen to Rs 50,723 crore, as per NSDL data.
However, FPIs have taken out Rs 25,572 crore from stock markets (excluding other investment avenues like IPOs) in October alone, according to data from stock exchanges. Domestic institutional investors (DIIs) invested Rs 4,471 crore during the month and mutual funds put Rs 1,509 crore in the stock market.
The FPI pullout happened at a time when stock markets, which were hitting new peaks on a daily basis, witnessed a correction last week. The Sensex has fallen 1,837 points, largely due to FPI selling in the last two days of the month.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said, “FPIs have turned big sellers in Indian equity markets in October. With the final figures including the last two days of trading getting added, this will be the largest FPI sell figure in 2021. The last eight days of trading saw sustained selling by FIIs.” Foreign brokerages like Merrill Lynch, UBS and Nomura have downgraded India due to excessive valuations. This might have prompted FPIs to sell on a sustained basis.
FPIs have been sellers in software to the tune of Rs 5,406 crore during the first half of October. Vijayakumar said, “This is profit booking since they are sitting on big profits. However, they have been buyers in banks and autos where there is valuation comfort.”
Analysts said three IPOs are expected to raise Rs 30,000 crore from the market in the next few days. These IPOs are likely to get heavily oversubscribed and, therefore, there will be a huge drain of money from the secondary to the primary market.
“This is another factor prompting FPIs to sell. Due to big FPI selling, markets have turned distinctly weak,” Vijayakumar added.
“Over the next two weeks, three high profile IPOs and a few smaller ones can attract large FPI inflows and that can keep US dollar-rupee under pressure. The fall in oil prices is adding to the appeal for rupee,” said Anindya Banerjee, DVP, Kotak Securities Ltd.
The rupee spot closed 16 paise lower at 74.87 on the back of IPO-related flows and weaker oil prices.
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