FPIs turn net sellers on strong US dollar, bond yields; August investment at ₹8,394 crore so far

In the cash market FPIs sold stocks for ₹10,921 crore and were net sellers on 10 days and buyers in only three days in August, so far, according to analysts. Although, FPIs continue to be consistent buyers in capital goods and power. Lately, they have started selling in financials as well. 

‘’After three months of sustained buying with cumulative investment of ₹13, 7603 crore, FPIs turned sellers in August….Strength in the dollar index at well above 103 and the US 10- year bond yield remaining around 4.25 per cent are short-term negatives for FPI flows to emerging markets like India,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

However, the trend of FPI selling in August has been countered by strong buying led by domestic institutional investors (DIIs), but it has turned out to be inadequate to arrest the decline in market, according to analysts. In view of the strong dollar and rising US bond yields, FPIs are likely to continue selling, in the near-term.

Meanwhile, 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 had 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.

Foreign institutional investors (FIIs) continue their selling streak on D-Street as Indian markets extended losses for the second straight session on August 18, amid volatility on global and domestic headwinds. Domestic benchmark equity indices settled lower for the second straight session on the backdrop of unfavourable global cues and additional foreign fund outflows. The domestic institutional investors (DIIs) were net buyers and invested ₹2,406 crore during Friday’s session.

As per the NSE data, FIIs cumulatively bought ₹12,302.17 crore of Indian equities, while they sold ₹12,569.17 crore — resulting in an outflow of ₹266.98 crore. Meanwhile, DIIs infused ₹6,501 crore and offloaded ₹6,161.82 crore, registering an inflow of ₹339.18 crore.

Global markets largely extended their losses as concerns over higher interest rates and slowing China’s economy weighed on investors. Higher US bond yields and default risk in China are poised to prompt FIIs to adopt a more prudent stance when considering investments in emerging markets, said analysts.

On Friday, The 30-share BSE Sensex ended at 64,948.66 down 202.36 points or down 0.31 per cent while Nifty also closed at 19,310.15 level, down 55.10 points or 0.28 per cent. Nifty FMCG, media, metals, PSU bank closed in green. Majority of sectors felt the heat wherein IT, realty and pharma were among the top losers. The broader indices too traded in sync and lost nearly half a per cent each.

‘’For the first time in 15 months, the Indian equity market fell for the fourth week in a row. Sensex, Nifty, and Nifty Bank fell nearly one per cent each. 31 nifty stocks recorded losses, which can be attributed to profit booking in the Nifty metal sector and selling activity by FIIs,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.

Updated: 19 Aug 2023, 05:27 PM IST