Domestic institutions bought stocks worth Rs 4,252 cr when market crashed on Friday

With this, while FPIs had sold stocks worth Rs 29,232 crore in the month of January, DIIs bought Rs 23,392 crore worth of stocks.

The FPI selling, which started early in January, gathered momentum towards the close of the month. “FPI strategy in January has been selling in India and buying in relatively cheaper markets like China, Hong Kong, South Korea and Thailand. Shorting India has been profitable for FPIs this month and the massive equity selling of Rs 5,977 crore in the cash market on January 27 also contributed to the market turmoil triggered by the ‘Adani crisis’,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“This kind of massive selling along with the crash in Adani stocks has impacted the market sentiments temporarily. Since there has been no pre-budget rally this year, a good budget can trigger a post-budget rally,” he said. Adani stocks had fallen by up to 20 per cent on Friday as the Hindenburg report on the Adani group dampened the sentiment.

Though recently there has been some net outflow in terms of the FPI investment, foreign investors are expected to come back as India offers an overall growth and stability. “There has been overall development in the capital market like the stock exchanges moving to T+1 settlement, SEBI introducing information database and the repository on municipal bonds. Similarly, the fiscal budget 2023 is likely to provide further acceleration for the foreign investment inflows as demonstrated by the Government in its previous budgets,” said Manoj Purohit, Partner & Leader, Financial Services Tax, BDO India

According to ICICI Securities, FPI holding of the benchmark Nifty 50 index nudged up 50 basis points quarter-on-quarter to reach 22.9 per cent during the third quarter of FY23 based on the shareholding data. Among the other key indices, FPI holdings dipped 20 bps for the Nifty Next 50 index to reach 13.4 per cent during Q3FY23 while it nudged up 40 bps for the Nifty Midcap and Nifty Small cap index to reach 14.2 per cent and 12.9 per cent respectively, it said.

The top 5 sectors with outflows include financials (Rs 5,700 billion), IT (Rs 3,500 crore), energy (Rs 2800 crore), discretionary consumption (Rs 2,500 crore) and telecom (Rs 1,800 crore). Inflows were observed in metals (Rs 2,500 crore) and other industrials to some extent, ICICI Securities said.

On an aggregate basis, the FPI holding of Indian stocks stands at Rs 47.9 lakh crore as on January 15, 2023, which is 17 per cent of the aggregate market cap of the listed space in India. FPI holding of Indian stocks hit a multi-year low of around 17 per cent in June 2022 and have since hovered around that mark, which could be a sign of a bottom formation in terms of their holdings, it said.