Foreign sales in financials drive second-highest monthly outflows in Jan

India’s financials accounted for nearly a third of the foreign sales from the country’s equity markets in January, highest outflows among sectors, data from the National Securities Depository Limited (NSDL) showed on Thursday. 

Last month, foreign portfolio investors (FPI) offloaded domestic equities worth about $9 billion, the second-highest monthly sales on record. Financials lost about $3 billion, the third-highest for the sector on record. 

The Nifty financial services index shed 1.2 per cent and Nifty 50 dropped 0.6 per cent last month — modest losses despite the high sales. 

“The drop is relatively minor compared to past periods of sustained FPI outflows, which is partly because of the larger presence of domestic institutional investors,” said Neelkanth Mishra, head of global research at Axis Capital. 

“The outflows are part of a broader emerging markets sell-off across countries like Taiwan, South Korea and Vietnam, and may persist given the rise in US Treasury yields, a stronger dollar and rising global uncertainty.”  

 

Besides financials, consumer services logged outflows worth $954 million, while IT stocks saw $739 million being offloaded by FPIs in January. 

FPIs will need a clear indication of economic and earnings recovery to return to India, said Sanjeev Hota, vice president and head of research of wealth management at Mirae Asset Sharekhan. 

It could be at least a quarter before FPIs return, given the global trade uncertainty, Hota added. 

While IT earnings mostly met market expectations, the consumer sector disappointed as the weakness in urban demand and a slowing economy weighed. 

The government announced personal tax cuts in the Union Budget on February 1 to boost consumption, while the Reserve Bank of India (RBI) is expected to cut interest rates on Friday to revive economic growth. 

The Indian rupee weakened to record low levels, hit by foreign outflows from the domestic capital markets and uncertainty of US tariff policies.