FPI selloff in Indian shares hits nine-month high in October: NSDL data

Foreign portfolio investors (FPIs) sold Indian equities worth 245.48 billion rupees ($2.95 billion) in the month of October, the most in nine months, data from the National Securities Depository (NSDL) showed.

FPIs had snapped a six-month buying streak in September. The selloff in October comes as U.S. Treasury yields hit fresh 16-year highs, making U.S. bonds more attractive than emerging markets like India, according to six analysts.

"Foreign selling will always have some influence over the trajectory of the markets, albeit that influence is reducing over time as domestic flows remain strong," said Pramod Gubbi, founder, Marcellus Investment Management.

India's blue-chip Nifty 50 lost 2.84% in October, logging the worst month in 2023 so far.

Geopolitical concerns due to the ongoing Middle East conflict also added to the risk aversion in the markets in October, analysts added.

WHAT FPIs SOLD IN OCTOBER

Financials witnessed the most FPI selling in October to the tune of 118.04 billion rupees. FPIs had bought shares worth 555.79 billion rupees in the sector between April and July.

Information Technology (IT) stocks saw outflows worth 32.62 billion rupees, amid weak results, elevated U.S. Treasury yields and rate concerns in the U.S. IT companies earn a significant share of their revenue from the U.S.

The current spate of foreign selling in Indian shares will be short-lived, according to an HSBC analysis of 21 similar instances of FPI outflows since 2001.

Easing interest rate outlook in the U.S. will ensure the return of foreign buying in Indian equities, driven by the country's strong growth prospects relative to its emerging market peers, according to four analysts.