FPI Exodus: Rs 17,794 Crore Gone in Just One Week!

Foreign Portfolio Investors (FPIs) have continued to sell Indian equities heavily in the first week of June 2024, despite a market rebound. Here’s a detailed look at the FPI activity and its impact on the Indian stock market.

FPI Selling Spree

1. Heavy Selling in June:

In the first week of June, FPIs offloaded equities worth Rs 14,794 crore. This follows substantial net sales of Rs 25,586 crore in May and Rs 8,671 crore in April 2024. By June 7, the total net selling by FPIs amounted to Rs 38,158 crore (approximately $4.6 billion).

2. Market Reaction:

The market experienced a significant crash of 5.9% on June 4 due to unexpected Lok Sabha election results. Despite this, FPIs continued their selling spree.

Domestic Institutional Investors (DIIs) Step In

1. DII Buying: 

Domestic institutional investors remained optimistic about Indian equities and continued to be net buyers, countering the heavy selling by FPIs. This buying activity helped stabilize the market to some extent.

FPI Activity Breakdown

1. FPI Purchases on Key Dates:

• On June 3, FPIs were net buyers of Indian equities worth Rs 6,850 crore. This activity was largely seen as short covering after exit polls predicted a win for the incumbent government.
• On June 7, FPIs made net purchases of Rs 4,391 crore. This was seen as a relief purchase after it became clear that the incumbent government would be returning to power for a third term.

2. Heavy Selling on June 4:

On June 4, FPIs sold a massive Rs 12,436 crore worth of equities in a single day, contributing to the market crash.

Future Outlook

1. Near-Term Market Impact:

The market is likely to be weighed down by the continued FPI selling, especially in large-cap sectors like financials and IT, where FPIs hold substantial assets.

2. High Valuations:

FPIs are concerned about the high valuations of Indian stocks, particularly in the broader market. This may lead to further selling as capital shifts to cheaper markets.

Positive Indicators

1. GDP Numbers and Reforms:

Positive GDP numbers and the government’s consistent policy reforms to make India a favorable investment destination are key factors that could eventually attract FPIs back to the market.

2. Interest Rate Cuts:

Recent announcements of interest rate cuts by the European Central Bank also create substantial investment opportunities in India, according to market experts.

Market Recovery Post-Election Results

Equity Market Rebound:

After the initial shock of the Lok Sabha election results on June 4, the equity markets recovered strongly. The Nifty ended the week with a 3.6% gain, driven by IT and financial stocks. IT stocks, in particular, saw a weekly rise of 8.6%.

The continued selling by FPIs has put pressure on the Indian equity market, but positive economic indicators and policy reforms may help attract investments back in the future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.