FPIs hoist their sails as they head for calmer waters, shows data

Will they weather the tempest of withdrawing Rs 25,305 crore since September, or is a perfect storm brewing for Indian equities?

Foreign portfolio investors (FPIs) have withdrawn Rs 25,305 crore from domestic markets since September. FPIs were net sellers in the first two months of 2023, but from March to August, they purchased equities worth Rs 1.7 trillion.

This selling trend has caused the National Stock Exchange Nifty Index to decline by 3.2 per cent from its September highs.

FPI selling initially began in September as profit-taking but intensified due to rising US bond yields and uncertainty regarding the rate hike trajectory.

With US yields surpassing 5 per cent, experts do not anticipate FPIs easing off their selling activity. Concerns about the West Asia conflict escalating and crude oil prices surging have added another layer of uncertainty to FPI selling.

Rising oil prices have a negative impact on Indian equities, given that India imports more than three-fourths of its oil requirements.

Analysts have mentioned that FPIs will closely monitor the trajectory of oil prices to decide whether to intensify their selling. Up to now, domestic institutional investors have mostly absorbed FPI selling.

Analysts warn that the downturn in equities will become more pronounced if domestic institutions join the selling spree alongside FPIs.