The total selling by FPIs in the domestic equities since the beginning of 2024 amounted to over ₹19,000 crore so far, as per data available on National Securities Depository Ltd (NSDL).
Meanwhile, the highest FPI outflows was seen in the financial services stocks worth ₹9,687 crore during the first fortnight of May 2024 (May 1 to May 15). This was after FPIs selling of ₹12,550 crore in the sector during April 15 – April 30. Overall, FPIs dumped financial services stocks worth around ₹55,000 crore in 2024 so far, the NSDL data showed.
Also Read: FPI outflows driven by skewed selling in banks, domestic cyclicals see robust inflows
Overseas investors also continued to sell heavily Information Technology (IT) sector shares during the first fifteen days of May. They sold IT sector stocks worth ₹5,574 crore during the period. Earlier, they had offloaded IT sector shares to the tune of ₹9,573 crore in the month of April.
The FMCG sector also continued to witness FPIs outflows at ₹1,158 crore in the first fortnight of May after outflows worth ₹7,914 crore last month.
Analysts believe the heavy FPI selling in the financial sector was purely led by profit-booking and should not be seen as the story has ended.
“Large investors are likely to be taking out profits after the recent rally in the share prices along with the sectoral rotation. The FPI selling should not be viewed as the end of the story as the fundamentals of the financial sector remain strong. The growth prospects of PSU banks are robust and the larger private sector banks and NBFCs are also likely to do well going ahead,” said Avinash Gorakshakar, Head Research, Profitmart Securities.
Gorakshakar remains cautious about the Indian IT sector stocks amid global headwinds.
“All is still not well in the US and Europe and there are growth concerns. The management of IT companies also sounded cautious. The sector is likely to remain an underperformer until we see strong earnings growth,” he added.
Also Read: Jim Rogers: I’ll invest in India again if the stock market goes down a lot
Meanwhile, as the Indian stock market benchmark indices Sensex and Nifty 50, hit record high on Monday, Gorakshakar advised to be extremely selective amid the ongoing euphoria as he believes the valuations are very high and could not sustain.
According to Gorakshakar, the domestic equity market has factored in favourable Lok Sabha election results and the market may see more upside on the result day, which is June 4.
He expects the frontline indices to gain during the week of election results and then the market to see profit booking after the upside.
On the other hand, FPIs have increased their activity in the country’s debt market after the announcement of India’s inclusion in various global bond indices. While the actual inflows from bond index inclusion are anticipated to begin in June 2024, early positioning by FPIs has already supported the 10-year government bond yield.
Overseas investors have infused nearly ₹47,000 crore in India’s debt market so far in 2024, NSDL data showed. Inflows in the debt market have been positive for all months this year, barring April.
“Starting FY25, a hotter-than-expected US inflation rate and the subsequent rise in US bond yields triggered significant selloffs, breaking a 12-month streak of inflows into the debt market. Currently, the slowdown in FPI flows into India’s debt market can be attributed to the uncertainty surrounding the outcome of the elections, high US bond yields, and ongoing geopolitical conflicts in the Middle East,” said Vaibhav Porwal, Co-founder, Dezerv.
However, he anticipates that once the election results are announced, which also coincides with the inflows from bond index inclusion, we will likely see a resurgence in FPI interest in India’s debt market.
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Published: 27 May 2024, 02:50 PM IST
