Foreign portfolio investors sell Rs 28,242 cr of equities so far in May.
FPIs sold ₹28,242 crore ($3.38 billion) of Indian equities in May, the highest since January 2023, amid election uncertainties and a shift to Chinese markets.
Foreign portfolio investors (FPIs) have sold ₹28,242 crore ($3.38 billion) of Indian equities in May so far, marking the highest sell-off since January 2023.
The heavy selling by overseas investors this month is attributed to uncertainties related to the ongoing general elections and a shift of funds from the Indian market to the Chinese market for better valuations.
In January of the previous year, FPIs offloaded ₹28,852 crore of domestic shares, according to data from the National Securities Depository Ltd (NSDL). For the calendar year 2024 (up to May 17), FPIs have sold ₹26,020 crore worth of local shares. In the cash market, foreign investors sold ₹35,532 crore through May 17, almost matched by domestic institutional investors (DII) buying ₹33,973 crore during the same period. “The main trigger for the FII selling has been the outperformance of the Hong Kong index, Hang Seng, which surged by 19.33 percent over the last month. FIIs are reallocating funds from pricier markets like India to cheaper ones like Hong Kong, where the PE ratio is around 10 compared to India’s 20,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The uncertainty surrounding the election outcome has also contributed to increased volatility in the Indian market. The recent spike in the fear gauge VIX indicates a high level of market uncertainty. The India VIX, reflecting the market’s near-term volatility expectations, has surpassed the 21 mark this month. “This shift in FPIs’ behavior is not random. It is a direct response to the ongoing geopolitical crisis in the Middle East, valuation concerns, and the strength of US bond yields,” said Vipul Bhowar, Director of Listed Investments at Waterfield Advisors.
According to Vijayakumar, FPI equity flows are likely to change dramatically based on the election results. Political stability will attract significant inflows. In the debt market, FPIs have net bought ₹45,087 crore and in the debt-VRR (Voluntary Retention Route), they have purchased ₹7,040 crore so far in 2024, NSDL data showed.
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