foreign portfolio investors (FPI) selling trend continued in the Indian markets in March as well. FPI outflows are highest in just 11 days of March as compared to the previous two months of this year. However, FPIs have been selling continuously for the last sixth month. For the third consecutive month this year, most of the selling was done in the equity market, while foreign investors were net sellers in the debt market for the second consecutive month.
Data given by NSDL, from March 01 to March 11, FPIs dropped heavily 45,608 crores in Indian markets – highest compared to February and January of this year where sales were to the tune of 38,068 crore and 28,526 crores respectively.
In equity market, FPI is on outflow 41,168 crore till March 11. Foreign investors’ appetite for equities has been tarnished since the beginning of this year and the Russia-Ukraine conflict has rocked the markets since late February, leading to frenzied selling. FPI outflow remained 35,592 crore and 33,303 crore in February and January 2022.
Meanwhile, since February, FPIs emerged as net sellers in the debt market, where there was outflow 3,073 crore. However, the sell-off continued in March, with higher outflows 4,205 crores. FPIs were net buyers in debt during January, where inflows were 5,194 crores.
Also, in the debt-VRR market, FPI sentiment has been volatile so far this year. As of March 11, investors were sellers with an outflow of Rs 226 crore as compared to an inflow of Rs 487 crore in the previous month. In January, an outflow of 2,114 crore was registered in this market.
In the hybrid market, FPIs became sellers for Rs 9 crore so far this month against net purchases of Rs 110 crore only in February and Rs 1,697 crore in January in March.
Why do FPI inflows into Indian markets turn bearish?
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The bulk of FPI inflows into India are coming from emerging market funds.”
Vijayakumar explained that the sale of FPIs is mainly restricted to financial and IT as these clauses constitute a large number of assets under the custody of the FPIs.
However, Vijayakumar also points out that an important takeaway from FPI sales is that it is not affecting all segments. For example, FPIs sold IT stocks worth Rs 10,984 crore in February, but IT is one of the best performing sectors in March.
“FPIs fear that India will be more affected by the rise in commodity prices, especially in crude oil, as India is a major crude importer,” Vijayakumar said.
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