FPI selling continues on valuation, rate-hike unease, Omicron scare

A combination of concerns over high valuations, interest-rate hikes, and the emergence of a new Covid variant has led to foreign portfolio investors (FPIs) remaining net sellers of Indian equities.

Since October, FPIs have sold shares worth Rs 32,965 crore in the domestic market. According to the provisional data from exchanges, FPIs sold shares worth Rs 2,070 crore on Friday.

Analysts said FPIs started taking some money off the table ever since indices hit new all-time highs and valuation discomfort emerged.

The benchmark S&P BSE Sensex hit its all-time high on October 19. This, coupled with concerns that the interest regime could turn less benevolent, led to some selling, although there was no indication then of a hawkish stance by central banks.

Some of the sale in secondary markets was to invest in primary markets. For example, in December so far, FPIs are net buyers in the primary market to the tune of Rs 11,782 crore.

Analysts said when interest rates go up, emerging markets are affected badly. Since India has been a large recipient of FPI flows, there is heightened selling. The weakening of the rupee due to rise in current account deficit is also tilted against India.

Pressing on, analysts said there could be more volatility in the next quarter. Some analysts said FPIs could become buyers again after another 2-3-per cent correction if they find any valuation comfort.