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After a sustained sell-off for almost two months, foreign portfolio investors (FPIs) have invested Rs 11,113 crore in the Indian stock market in the last three days, indicating that FPIs could be reviewing their India plans.
After selling equity for Rs 113,858 crore through exchanges in October, FPIs sold another Rs 41,872 crore of equity through exchanges till November 22, taking the total outflows to a whopping Rs 155,730 crore since October 1 this year, according to exchange data. “We don’t think FPIs are coming back in droves. The market might see fresh allocation in January after December year-end and vacation,” said an analyst.
FPIs invested Rs 9,947 crore on November 25 and Rs 1,157 crore on November 26. “There could be more selling by FPIs as they face year-end redemption from their investors,” he said.
The benchmark Sensex has gained 3.98 per cent, or 3,079 points, at 80,234.08 since November 21. On November 22, when the Sensex jumped by 1,961 points, or 2.54 per cent, to 79,117.11, FPIs pulled out just Rs 1,278 crore. On Wednesday, the Sensex gained 230 points.
On the other hand, domestic institutional investors sold stocks worth Rs 7,516 crore in the last three days.
DIIs invested Rs 30,042 crore in November so far and Rs 107,254 crore in October this year.
“A decisive NDA alliance victory in a big state like Maharashtra is positive for the stock market. However, we need to note that Lok Sabha elections just got over and the current central government has another full term to complete… so once state elections are over, markets’ focus will shift back to earnings, Budget, US policies and geo-politics,” said Manish Jain, director – institutional business, Mirae Asset Capital Markets.
Mainly three factors led to the recent massive selling by FPIs in the last two months. “One, the ‘Sell India, Buy China’ trade. Two, the concerns surrounding FY25 earnings. Three, the ‘Trump trade.’ Of the three, the ‘Sell India, Buy China’ trade is over,” said K Vijayakumar, chief investment strategist, Geojit Financial Services. The Trump trade also appears to be on its last leg since valuations have reached high levels in the US.
“Therefore, the FPI selling in India is likely to taper off soon. Also, valuations of large caps in India have come down from the elevated levels. FPIs have been buying IT stocks and this has been imparting resilience to IT stocks. Banking stocks have been resilient despite FII selling, mainly due to DII buying,” he said.
According to a JM Financial report, the results of the 2024 US presidential elections indicate that Trump and the Republicans have gained control over all the three branches of the US government. “We believe Trump’s plans for lower corporate taxes, higher import tariffs, and deportation of illegal immigrants will result in growth in the US economy, higher inflation, higher interest rates, and a stronger US dollar. This might tempt FPIs to take at least some portion of their money to the US,” the report said.
