So far in December, foreign portfolio investors have sold equities worth over Rs 33,000 crore. This trend is expected to continue for the rest of 2021. When can investors get a respite from FPI selling?
The bull run in the Indian equities has been toppled by persistent selling by foreign investors. Since October, FPI counterparts have sold equities worth Rs 33,805 crore. Of this, Rs 14,300 crore, or 42 per cent, was offloaded in December alone. Analysts believe FPIs started taking some money off the table ever since indices hit new all-time highs and valuation discomfort emerged.
The benchmark Sensex hit its all-time high on October 19. This, coupled with concerns that the interested regime could turn less benevolent, triggered selling as emerging markets are affected badly when interest rates go up. And since India has been a large recipient of FPI flows, there is heightened selling. The weakening of the rupee due to the rise in the current account deficit is also tilted against India.
That apart, some of the sale in secondary markets was also because of investment options in the primary markets. For example, in December so far, FPIs are net buyers in the primary market to the tune of Rs 11,782 crore. Let’s go to Vaibhav Sanghvi, co-CEO of Avendus Capital, to understand what’s driving FPIs away from EMs, including India.
That said, while most analysts expect the trend to remain a key overhang on the domestic equities in the short term, there are some who are optimistic about FPI activity in 2022. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, for instance, sees the current FPI activity as “profit booking” and not “selling”.
“FPIs have been sitting on big profits on bank stocks which they accumulated during 2015-20.
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