FPIs pull out ₹2,000 cr from Indian equities in Feb so far; favours auto, construction stocks

FPIs pulled out at leastRs 2,006 crore from Indian equities up to February 17, in the current month, as per the latest data of NSDL. Also, these investors were net sellers in debt-VRR and hybrid instruments to the tune of ₹2,036 crore and ₹131 crore.

But FPIs continued to be net buyers in the debt market with an inflow of ₹2,413 crore so far in February month.

However, buying in the debt market could not offset the impact of selloffs in equities and debt-VRR. Hence, so far in February, FPIs are net sellers with an outflow of ₹1,760 crore in the overall Indian market.

In January 2023, FPIs sold a whopping ₹28,852 crore in Indian equities.

Thereby, FPIs outflow in Indian equities year-to-date comes to around ₹30,858 crore.

Why FPIs have been selling?

Explaining the reason behind FPIs selling bias, Dr.V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “the distinctive feature of stock market performance this year, so far, is India’s underperformance with Nifty down by 1.4% YTD. In contrast, the Taiwan index is up by 8.3 % and Shanghai Composite is up by 3.4%. The principal reason for this variation in performance is the FPI outflows from India and inflows into other emerging markets like China, Taiwan, Hong Hong, and South Korea.”

Vijayakumar added, outflows from India have been triggered mainly by the high valuations in India and inflows into other markets have been triggered by their relatively cheaper valuations.

However, Geojit’s chief strategist also pointed out that “the opening up of the Chinese economy and improving prospects there has played an important role in the massive flows to China. An important recent trend is that FPI selling has reduced significantly and FPIs have even turned buyers in some recent days.”

As per Vijayakumar, FPIs have been buyers in autos and auto components and construction. They were sellers in banking and financial services in which they are sitting on good profits.

Similar has been the case with FIIs. Foreign institutional investors (FIIs) have overall sold ₹1,408.36 crore in domestic equities, as per Stock Edge which tracks the daily performance of FIIs and DIIs. In the previous month, the selloff was around a massive ₹41,464.73 crore.

Going forward, Geojit’s strategist said, “it appears that the sustained selling in India witnessed from early January is over, but they might sell again at higher levels.”

So far in 2023, till February 17th, Nifty 50 has plunged by over a percent, while the downside in Sensex is broadly muted. On Friday, Sensex closed at 61,002.57 lower by 316.94 points or 0.52%. Nifty 50 shed by 91.65 points or 0.51% to end at 17,944.20.