FPIs turn net sellers in August, offload over ₹7,000 crore after 3-month rally

However, FPIs continue to invest in capital goods and selectively in IT. However, the trend of FPI selling in August has been countered by strong buying led by domestic institutional investors (DIIs). 

FPIs recorded their fifth straight monthly buying in the Indian markets during July 2023 – slightly less that ₹47,148 crore in June – which was the highest monthly FPI inflow since August 2022. Sustained FPI inflows have powered the uptick in the blue-chip Nifty 50 and S&P BSE Sensex, driving the benchmarks to record highs in July. 

‘’FPI became net buyers with an inflow of $11.9 billion in the April-June quarter compared to an outflow of $14.4 billion in the corresponding quarter of the previous year. Among the sectors, financial services, automobiles, FMCG, and healthcare saw increased interest from foreign investors,” said the Finance Ministry in its monthly economic review for June 2023.

Analysts also reckon that after stock markets scored record gains in the past three months, some profit-booking by the FPIs now can be expected.

“After three months of sustained buying with cumulative investment of ₹13,7603 crore, FPIs have turned sellers in India. In August through 11th FPIs have sold stocks to the tune of ₹7,543 crores. Strength in the dollar index and the US 10- year bond yield remaining well above 4 per cent is a short-term negative for FPI flows to emerging markets like India,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

‘’In view of the strong dollar and high US bond yields FPIs may continue to sell in India. Also, since the markets have rallied smartly during the last three months, some profit booking by FPIs would be rational and can be expected,” added Dr. V K Vijayakumar.

On August 11, foreign institutional investors (FIIs) took back to selling after a two-day gap as Indian markets settled lower on weak global cues with the dollar’s rise against its major global peers after the US inflation came in steady. The DIIs turned net buyers and invested ₹500.35 crore during Friday’s session. 

‘’A critical aspect to monitor is the exchange rate between the rupee and the dollar. Recent indications of rupee weakness, with the potential to breach the 83 level against the dollar, necessitate close observation. Given the recent consistent selling by FIIs, their future actions will be closely tracked, as they hold the potential to dictate the overall trajectory of headline indices,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Domestic equity benchmark Sensex closed 365.53 points on Friday, or 0.56 per cent, lower at 65,322.65 while Nifty closed the day at 19,428.30, down 114.80 points, or 0.59 per cent. Mid and smallcaps also fell but they still outperformed the benchmark.

The BSE Midcap index ended 0.13 per cent lower while the Smallcap index ended with a loss of 0.31 per cent. For the week, Sensex lost 0.6 per cent while Nifty declined 0.45 per cent. Analysts suggest that traders should focus more on risk management citing mixed signals and staying stock-specific.

‘’From a technical standpoint, the Nifty index is exhibiting signs of weakness, characterized by a lower top formation. The challenge lies in surpassing the 20-day moving average (20-DMA), positioned around the 19,650 mark. On the downside, immediate support rests at 19,300. A breach below this level could expose Nifty to further declines, possibly targeting the 19,191 and 18,888 levels. The re-establishment of bullish momentum hinges on a rebound above the 20-DMA,” explained Meena.

Updated: 12 Aug 2023, 05:56 PM IST