FPIs Invest In IPOs and Pull Out of Stock Markets

There’s a “sell” call regarding India among the foreign portfolio investors (FPIs). Foreign portfolio investors will have invested around Rs. 23,000 crores in the Indian capital markets as of 2021. However, they have taken out a vast sum from the stock markets around concerns of valuation. This contrarian game plan sparks some surprise and caution. Below is a rundown of the whole story.

Key highlights of the Foreign Public Investors and the “Sell” Call

• FPIs have invested around Rs. 23,000 crores in these IPOs or initial public offerings of various companies such as PB Fintech, FSN E-commerce. However, they have pulled out around Rs. 11,000 crores.
• The reason for this pullout is because of the valuation concerns regarding the companies.
• In November, FPIs invested around Rs. 14,051 crores as per the data released by NSDL (National Securities Depositories Limited). Moreover, the data indicate that the Foreign portfolio investors are aiming for unicorn companies listed on the stock exchange.
• However, since the beginning of November, FPIs have been on a sell mode. They are selling even in valuable and stable sectors such as banking, IT, to name a few. This indicates a sell call on Indian capital markets. So, what’s the cause for concern here? FPIs are worried about the stretched valuations of Indian companies and are looking to safeguard themselves from likely losses in the future. Hence, the ‘sell’ call.
• Yet, this isn’t all bad news, as domestic institutions have been aggressively buying up the offloaded shares on the stock market. Even retail investors who are high on liquidity are investing heavily in these stocks. Therefore, analysts explain that the market is running through uncertain times as the FPIs slowly pull out.
• Retail investors are going in for the stocks of those companies that were IPO-bound via mutual funds. All equity-based schemes have reported positive cash flows.

Bottom Line

Foreign Portfolio Investors are selling out, indicating the move out of “smart” money. This trend may turn into a cause of concern as it indicates uncertain times.

Frequently Asked Questions

1. How much had Foreign Portfolio Investors invested in FSN E-commerce?

Ans. FPIs had invested around Rs. 1,570 crores in FSN e-commerce.

2. How much had Foreign Portfolio Investors invested in PB Fintech?

Ans. FPIs had invested around Rs. 1,400 crores in PB Fintech.

3. How much have domestic institutions invested in cash markets in November?

Ans. Domestic institutions have invested around Rs. 9,663 crores in the cash markets in November.