3 min readMumbaiJan 28, 2024 03:27 AM IST
First published on: Jan 28, 2024 at 03:27 AM IST
After two months of consecutive buying, foreign portfolio investors (FPIs) have become net sellers in January as they offloaded Rs 24,734 crore worth of Indian equities so far in the month amid concerns over delay in interest rate cuts by the United States (US) Federal Reserve and high valuation of domestic shares.
The selling of stocks by foreign investors in the current month (till January 25) comes after heavy buying witnessed in November last year at Rs 9,001 crore and in December at Rs 66,135 crore. In October 2023, FPI outflow stood at Rs 24,548, according to the data from the National Securities Depository Ltd (NSDL).
The FPI sell-off in January was also one of the reasons for the fall in benchmark indices, Sensex and Nifty, which had tanked around 2 per cent in a highly volatile month.
According to V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, FPIs continued to be sellers in the cash market having sold equity worth Rs 27,664 crore through January 25.
“FPIs were sellers in autos and auto ancillary, media and entertainment and marginally in IT. They bought oil and gas, power and selectively in financial services,” he said.
Comments from Federal Reserve System’s Governor Christopher J Waller, on January 16, that interest rate cuts need to be calibrated and not rushed weighed on the investors’ sentiments as it dampened hopes of early rate cuts by the US central bank, resulting in heavy selling by FPIs in the domestic shares. There was a hope earlier that the US Federal Reserve may start cutting interest rates as early as March this year. The negative sentiments about interest rates in the US likely to remain higher-for-longer-than-expectation led to a rise in the yield on the US 10-year bond to over 4.18 per cent, compared to 3.18 per
“The rising bond yields in the US is a matter of concern and this has triggered the recent bout of selling in the cash market,” Vijayakumar said. Markets will closely watch the US Federal Reserve’s monetary policy announcement on January 31, analysts said.
“Another critical event to watch is the outcome of the US Federal Reserve’s policy meeting scheduled for January 31st, which could provide insights into the potential timing of interest rate cuts,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Domestically, the sell-off by FPIs was driven by concerns over higher valuation of shares despite the economy doing well and improvement in the corporate earnings. Selling by overseas investors in the current month comes ahead of the January-end deadline set by the Securities and Exchange Board of India (Sebi) for certain FPIs to disclose additional details, including their ownership and economic interest.
However, FPIs, who have been mandated to liquidate their holdings as per the Sebi’s January-end deadline, will have seven months more to provide additional disclosures, which will give some respite to the overseas investors.
According to V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, FPIs continued to be sellers in the cash market having sold equity worth Rs 27,664 crore through January 25.
Share
