Foreign portfolio investors (FPIs) are now engaged in the strategy of selling stocks in the stock market and investing through the initial public offering (IPO) route. FPIs sold equity for Rs 28,976 crore through the exchange even while investing Rs 11,483 crore through the primary market category in the month of August so far. “A significant trend in FPI flows recently, which has become pronounced in August, is the sustained selling by FPIs through the exchange while continuing to invest through the ‘primary market & others’ category. This difference in FPI behaviour is due to the differences in valuations,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services. The primary market issues are at comparatively lower valuations while in the secondary market, the valuations continue to remain high. “So FPIs are buying when securities are available at fair valuations and selling when the valuations get stretched in the secondary market,” he said. Analysts said this trend is likely to continue since India is the most expensive market in the world now and it is rational for FPIs to sell here and move the money to cheaper markets. “This picture doesn’t change even if the market turns more bullish on fears regarding US recession receding,” Vijayakumar said. However, domestic institutional investors (DIIs) led by LIC and mutual funds bought heavily in August. DIIs made net investments of Rs 34,060 crore in August so far. LIC, the largest institutional investor, invested Rs 38,000 crore in the stock market in the June quarter and Rs 132,000 crore in the previous financial year. It’s expected to invest more in the remaining quarters of the financial year. FPI outflows witnessed in August were primarily driven by a combination of global and domestic factors. “Globally, concerns about the unwinding of the Yen carry trade, potential global recession, slowing economic growth and ongoing geopolitical conflicts led to market volatility and risk aversion. Domestically, after being net buyers in June and July, some FPIs might have chosen to book profits following a strong rally in previous quarters,” said Vipul Bhowar, director, Listed Investments, Waterfield Advisors. Additionally, mixed quarterly earnings and relatively higher valuations have made Indian equities less attractive. Despite these factors, India’s strong economic performance, including GDP growth, reduced fiscal deficit, manageable current account deficit, and strong sector growth and industrial production, continues to attract many FPIs, indicating that FPI flows into India should persist,” Bhowar said. On Friday, the BSE Sensex rose 1.68 per cent, or 1,330.96 points to close 80,436.84 while Nifty 50 surged 1.65 per cent, or 397.4, to finish at 24,541.15. The US CPI inflation rose 2.9 per cent for the 12 months ending July, the smallest 12-month increase since March 2021. “Positive US economic data like cooling inflation and robust retail sales numbers shrugged off recession fears while talks of a rate cut by the US Fed as early as next month fuelled a mega rally across global equities, including India,” said Prashanth Tapse, senior VP (Research), Mehta Equities Ltd. After remaining above the 4 per cent mark for nearly five years, retail inflation slipped below this level to a 59-month low of 3.54 per cent in July mainly due to a high base effect, recent data released by the National Statistical Office (NSO) showed. If inflation remains below the 4 per cent level, the RBI is expected to cut rates by the end of the calendar year.
