FPI sell-off continues; in only three trading days in November, Rs 3,400 cr was wiped out

 FPI sell-off continues; in only three trading days in November, Rs 3,400 cr was wiped out

Based on the information provided by the depositories, FPIs sold shares worth Rs 3,412 crore between November 1 and November 3. Since the beginning of September, FPIs have been selling aggressively.

Prior to the outflow, FPIs continuously purchased Indian stocks from March through August during the previous six months, bringing in a total of Rs 1.74 lakh billion.

Due to rising interest rates and geopolitical unrest in the Middle East, Foreign Portfolio Investors (FPIs) continued their selling binge, withdrawing nearly Rs 3,400 crore from the Indian equities markets in the first three trading days of November. This followed withdrawals by these investors of Rs 14,767 crore in September and Rs 24,548 crore in October, according to statistics from the depositories.

Prior to the outflow, FPIs continuously purchased Indian stocks from March through August during the previous six months, bringing in a total of Rs 1.74 lakh billion.

Since the primary catalyst for FPI selling, rising bond rates, has reversed after the US Federal Reserve signaled a dovish position in its November meeting, it seems doubtful that this selling trend will continue in the future.

"Joint Fed Chair Jerome Powell's cautious remarks that 'despite higher inflation, inflationary expectations remain firmly anchored' are the primary cause of this reversal in bond rates. According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Service Sectors, "the market has interpreted this argument as the end of the rate hiking cycle."

Based on the information provided by the depositories, FPIs sold shares worth Rs 3,412 crore between November 1 and November 3. Since the beginning of September, FPIs have been selling aggressively.

This might be primarily explained by the rising rates on US Treasury bonds along with the escalating geopolitical tensions brought on by the war between Israel and Hamas, according to Himanshu Srivastava, Associate Director of Operations, Manager Research at Morningstar Investment Counsel India.

"The global panorama has become significantly more uncertain, with a threefold impact of recessionary questions, rising inflation, and the outbreak of diplomatic disputes in the first week of October," said Bharat Dhawan, managing partner of professional consulting company Mazars in India.

Experts predict that under the present circumstances, safe-haven assets like gold and US dollars may get more attention. In contrast, statistics indicated that the debt market brought in Rs 1,984 crore during the reviewed period, after its receipt of Rs 6,381 crore in October.

"This approach can represent a tactical move by foreign investors in allocating funds to Indian debt in the short term, with an eye toward of redirecting capital into the stock markets when conditions become more favourable," remarked Srivastava of Morningstar.

According to Sahil Dhingra, smallcase manager and founder of Alvez Capital, "the incorporation of Indian G-Sec in the JP Morgan The government Bond Index Emerging Markets (GBI-EM) has prompted foreign fund investments in the Indian Bond markets."

With this, FPIs have already invested a total of Rs 92,560 crore in equities and Rs 37,485 crore in debt markets this year. Frontline banking, autos, capital goods, and mid-caps in IT and real estate are among the industries that are expected to do well.