FPIs unleash turbulence with Rs 21,000 cr weekly selloff in sudden shift

After months of buying, foreign portfolio investors are turning a blind eye to Indian equities in the month of January amid concerns over high valuations and uncertainty around global interest rates trajectory.

In the week gone by, FPIs net sold shares worth over Rs 21,000 crore, signalling a sudden shift in the strategy. So far in the month of January, FPIs were net sellers at Rs 16,455 crore.

Domestic institutional investors, meanwhile, are holding for as they invested about Rs 10,274 crore in Indian equities so far this month.

Analysts say the rise in US bond yields and elevated valuations are triggering capital outflows from emerging markets.

The not-so-pleasing results of India’s leading HDFC Bank also aggravated the outflows as they increased short positions. On Wednesday, when HDFC Bank released its quarterly results, Dalal Street has seen the single biggest outflows in nearly five years at Rs 10,500 crore.

A majority of this could have been in HDFC Bank given the high concentration of FIIs in the stock. FPIs hold more than 50% stake in the private sector lender.

Not only India, other emerging markets like Taiwan, South Korea and Hongkong are also bearing the brunt of FII wrath due to the above factors.”But the FPI strategy of pushing the market down is not working since their selling is countered with buying by DIIs and individual investors. FPIs have been buying IT stocks this month after the management commentary following the Q3 results of IT managers indicated optimism of demand revival in the sector,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

The steep selloff by foreign investors ensured that benchmark indices recorded their worst week in over two months. Nifty bank too has seen its biggest weekly fall in a year.

Despite these challenges, the midcap and smallcap segments demonstrated resilience, outperforming largely due to robust domestic liquidity. Notably, PSU stocks, especially in the railway sector, sustained a bullish trend.

Going forward, the market will react to quarterly earnings as a substantial number of heavyweights are slated to release their third-quarter numbers.

“Anticipations surrounding the upcoming budget may also drive stock- and sector-specific movements. Globally, attention will be directed towards Japan’s monetary policy and US economic data, with a continued close watch on geopolitical developments,” said Santosh Meena, Head of Research, Swastika Investmart.

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